Household willingness to pay for various attributes of residential solar panels: Evidence from a discrete choice experiment

Abstract

The predominant approach in the US environmental policy so far has been to offer financial incentives for renewable energy as a more politically palatable alternative to market based policies. The policies around residential rooftop solar have generally aligned with this approach. However, recent years have witnessed a reversal in the once favorable financial terms for residential solar energy in many states largely due to concerns regarding unfair cost shifting and efficiency. Consequently, solar vendors appear to increasingly hinge their marketing strategies on the narrative of “self-reliance”. A pertinent question is whether there is enough willingness to pay for such non-market, private benefits to sustain the growth of residential solar. To address this, we designed and implemented a discrete choice experiment within a stated preference framework. Respondents were asked to make a choice among different home energy options offering varying financial terms and other attributes such as self-reliance and home battery. Notably, a random subset of the respondents was presented with the net present value (NPV) of the dollar cost of each alternative, while this information was withheld from the rest of the sample. We estimated the utility coefficients through hierarchical Bayes (HB) mixed logit and subsequently derived the marginal willingness to pay (mWTP) for each attribute, along with their individual-level confidence intervals. Our findings indicate substantial heterogeneity in preferences among decision-makers. On average, the willingness to pay for self-reliance falls short of supporting residential solar growth without financial incentives. Furthermore, respondents exposed to NPV information exhibited significantly lower mWTP values, underscoring the potential efficacy of NPV information in improving willingness to pay estimates within investment-oriented settings.