Household Demand for Community- and Rooftop-Solar Electricity Conceptual and Numerical Assessments

This paper characterizes the key tradeoffs faced by households in deciding how much solar power to produce privately on their rooftops or to subscribe to in a community solar project, and how these tradeoffs are influenced by a regulator's pricing strategy. Households choose their rooftop- and community-solar consumption levels and respond to the regulator’s pricing scheme, which includes a two-part tariff for conventional, non-solar electricity, as well as a rooftop solar subsidy rate, a separate price for community solar, and a net-metered rate for a household's remitted electricity. We derive a suite of household comparative static effects and explore four key implications pertinent to the growth of rooftop and community solar: (1) attainment of a community-wide solar electricity standard, (2) the potential of a “death spiral” experienced by the regulator, (3) the effect of a “solar tax” levied on the production of solar electricity by rooftop-solar households, and (4) adoption of “behind-the-meter” battery storage by rooftop-solar households. We obtain both analytical and numerical results (calibrated to current US data) for each of these implications, enabling us to better understand the underlying conditions governing household responses to incentives provided by a regulator and the social implications associated with these responses