Exploring the Effect of Gross Feed-In Tariffs for Solar Photovoltaic Systems on Household Electricity Consumption: Is There Evidence of a Rebound Effect?

Abstract

Climate change is a significant problem facing society that must be addressed to combat the detrimental consequences on the environment and economy. The residential sector in Australia presents an opportunity for decarbonization through altering individual consumer behavior. This opportunity has been seized by Australian state governments through the prescription of solar feed-in tariffs (FiT) to promote the uptake of small-scale renewable energy generation (Stock et al., 2017). The New South Wales Solar Bonus Scheme, in effect from January 2010-December 2016, is the focus of this study. Employing various fixed effects models, this study determines whether solar gross feed-in tariff payments received by households resulted in a rebound effect. The “rebound” being the increase in electricity consumption above the level that would have resulted had no solar PV system been installed. The data used in this analysis takes advantage of the largest source of publicly accessible data reporting both solar generation and electricity consumption at the household level in NSW (Ausgrid, 2015). To date, empirical analysis seeking to quantify the rebound effect for small-scale solar PV has been very limited, not only in Australia but globally (Haas et al., 1999; Keirstead, 2007; McAllister, 2012; Blackburn, 2014). This paper expands upon the existing literature through employing a wider data sample than previous studies to provide an estimation of the rebound effect with increased accuracy (Deng & Newton, 2017; Havas et al., 2015). This study finds that a small rebound effect of 1.3% exists among households receiving a 20c gross FiT under the NSW Solar Bonus Scheme. Despite this small effect, the result is significant given that the full potential greenhouse gas reductions of this incentive mechanism are not realized. The results suggest human behavioral shifts in response to small-scale solar PV adoption should be a factor when designing incentive mechanisms such as feed-in tariffs.