Defining Technology-Adoption Indifference Curves for Residential Solar Electricity Generation Using Stated Preference Experiments

Abstract

Success in achieving environmental goals is intrinsically dependent on policy decisions, firm decisions, and consumer decisions. Understanding how consumer product adoption jointly depends on policy incentives and firm design decisions is necessary for both firms and governments to make optimal decisions. This paper demonstrates a methodology for assessing the linkage between policy incentives and firm decisions on the level of consumer adoption of a particular technology. A policy optimization is formulated and technology-adoption indifference curves are constructed to allow firms to identify the most profitable direction for product development given the policy environment, and similarly to allow government organizations to set policies that maximize technology adoption given firm decisions. As an example we use the residential solar electricity industry in New South Wales, Australia. Consumer choice is modeled using a mixed logit choice model estimated with hierarchical Bayes techniques from stated preference experiment data.