The Effect of Electricity Prices on Residential Solar PV Adoption: Fukushima as a Natural Experiment

Takahiko Kiso, H. Ron Chan

Research output: Working paperDiscussion paper

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There are a range of private financial benefits of residential solar photovoltaic (PV) installation, such as a reduced electricity bill, tax incentives and a feed-in tariff for generated electricity. To empirically analyze how rising electricity prices affect household adoption decisions, we use the 2011 Fukushima nuclear disaster as a natural experiment. The shutdown of nuclear power plants across Japan led to a sizable increase in electricity prices that varied by region, allowing us to identify the effect of electricity prices on household PV system adoption. We find that higher electricity prices are significantly more influential on PV adoption on existing homes than on newly-built homes. Our estimated electricity price elasticity of PV systems ranges from 0.9 to 1.2 for existing homes and is much smaller and statistically insignificant for newly-built homes. We discuss behavioral mechanisms explaining this difference and implications for policies stimulating residential adoption of renewables.
Original languageEnglish
PublisherUniversity of Aberdeen: Business School
Number of pages28
Publication statusPublished - 2018

Publication series

NameDiscussion Papers in Economics and Finance
PublisherUniversity of Aberdeen Business School
ISSN (Electronic)0143-4543


  • Solar PV adoption
  • Electricity prices
  • Fukushima
  • Natural experiment


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