Ruhr Economic Papers

Ruhr Economic Papers #590

Installing Photovoltaics in Germany: A License to Print Money?

by Mark A. Andor, Manuel Frondel and Colin Vance

RUB, RWI, 11/2015, 26 S./p., 8 Euro, ISBN 978-3-86788-685-7 DOI: 10.4419/86788685



Using detailed data originating from several hundred households of the German Residential Energy Survey (GRECS), this paper empirically investigates the returns on investment in home-equipped photovoltaics (PV) installations. We find that these returns were particularly high in the years 2009 to 2011, when large subsidies for solar electricity coincided with plummeting module prices. While our empirical analysis demonstrates that such investments also incur substantial risks, there is evidence that, above all, wealthy households tend to benefit from the solar subsidies, whereas the costs of financing these subsidies are borne by electricity consumers at large, not least poverty-endangered households. The resulting redistribution of financial resources raises the question of whether the burden-sharing of Germany’s transition to an alternative energy system is fair.

JEL-Classification: Q28, Q42, Q48

Keywords: Solar subsidies, redistribution effects; German Residential Energy Consumption Survey