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Why Are Some Residential Customers Reluctant to Adopt Solar?

Benjamin Retik
May 25, 2021

Guidehouse Insight solar panel

In February 2021, I wrote about how community solar can better serve low and middle income customers. Part of this discussion focused on the role of incentives in convincing consumers to switch from traditional energy to solar energy. One of the primary takeaways from the Stauch and Gamma paper I discussed in that blog was that the industry can increase participation in community solar programs by better communicating the benefits of solar energy.

Customer Biases Affect Community Solar Enrollment—Let’s Fix That

A recently published working paper from researchers at the University of Pennsylvania takes another look at how we can address the biases that are preventing home solar adoption. According to a Pew Research Center survey from 2019, only 6% of US residents have installed solar panels on their house. The working paper provides three types of bias that the authors believe discourage investment in solar panels. To quote directly from the paper, these biases are:

  • Myopia: The tendency to focus on overly short future time horizons when appraising immediate costs and the potential benefits of investments
  • Inertia: The tendency to maintain the status quo
  • Herding: The tendency to base choices on the observed actions of friends and neighbors

These biases pose a challenge to the widespread adoption of home solar and for each of these biases the authors offer a solution. For myopia bias, the authors suggest that a power purchase agreement (PPA) can be a successful tool. A PPA is successful in overcoming the myopia bias because it removes the upfront cost of solar installation—in effect smoothing the benefit over time.

To address the inertia bias, one option is to have real estate developers introduce solar energy as the default and allow consumers to opt-out in favor of some alternative. Behavioral economics has established that people are much more likely to stick to the default option. While default options are limited in the US, the opt-out model may finally be gaining traction as evidenced by the recent approval of an opt-out community solar model in New York.

Opt-Out Models Might Lead the Way

Ideally, solar energy would be established as the social norm to address the herding bias, which is easier said than done. The question, then, is how do we establish residential solar as the social norm? Well, creating an opt-out model would help by guiding more residents toward solar energy. The authors note that well-enforced regulations can be a complement to social norms in disabling the herding bias.

Overcoming these biases to solar panel adoption requires a decision that confronts them directly. The price of solar PV has decreased drastically to the point where cost may no longer be the primary obstacle to adoption. It is important that current barriers to solar adoption are kept in mind when crafting policy and marketing.