Demand for renewable energy via green electricity versus solar installation in Community Choice Aggregation

Abstract

Consumers can procure renewable energy via subscribing to green electricity from their utility for a price premium (or virtual option) or installing residential solar (or physical option). From economic theory, these options can be framed as substitutes (choosing between) or complements (choosing both). To test for this relationship, this study estimates how subscriptions to green electricity influence demand for residential solar installations using data from 21 towns served by Cape Light Compact, one of the oldest Community Choice Aggregation (CCA) programs in the United States. Regression analysis suggests that virtual and physical options are treated as substitutes. An increase in the relative price of solar installation is correlated with fewer solar installations and a higher demand for green electricity. However, the price of green electricity does not explain residential solar installations. This has implications for the marketing of renewable procurement options and long-term planning for distributed versus utility-scale renewables. © 2022 Elsevier Ltd