The Impact of Solar Panel Installation on Electricity Consumption and Production

Since 2010, the Uruguayan government has fostered the instal lation of solar panels among households and firms to promotesmall-scale renewable electricity production. Under this policy, agents with solar panels are allowed to feed any electricity sur plus into the grid. We study the economic and environmental consequences of this policy. We collect a novel dataset on elec tricity extraction and injection into the grid at a household-firm level for the whole country. First, we find that installing a solarpanel reduces the electricity extracted from the grid. Second, we find that it increases the electricity injected into the grid. Third, we find that it reduces CO2 emissions between 0.35 and 0.03 kg per month and agent. Fourth, we find evidence of a rebound effect: electricity consumption after the solar panel installation increases between 20% and 26%, on average. Lastly, we propose an alternative policy that allows agents to store their electricity surplus in batteries instead of immediately injecting it into the grid. According to our model, the best time to inject electricity into the grid is around 9 PM, when fossil-fuel facilities satisfy most of the electricity demand. We leverage household and firm-level data to study the effect of a net-metering policy on electricity extraction and injection, showing what countries can expect from implementing such a policy.