Social Image in the Solar Home Market

Pilot Survey Evidence and Ways Forward

Ben Gilbert, Nick Gorman, Anthony Denzer, Jon Gardzelewski

University of Wyoming

Outline of the Talk

• what we know about social aspects of residential solar adoption patterns

• what we know in the economics field about how social behavior and spending behavior intersect.

Review

• results from our pilot survey of demand for solar and energy efficiency in new homes.

Present

• tests that could be conducted in the field with the right industry, utility, government, or nonprofit partners

Propose

Solar Norm or Aesthetic Scourge?

Solar Norm or Aesthetic Scourge?

Solar Norm or Aesthetic Scourge?

Solar Norm or Aesthetic Scourge?

Spatial Patterns in Residential Solar

The literature shows there are spatial adoption patterns in residential solar adoption.

• Home price premium is larger in neighborhoods with more college grads, more Prius drivers, and more environmentalists1.

• Solar installation increases the probability of a subsequent installation in the same zip code2.

• Solar adoptions “cluster” around an initial adopter, grow in a centrifugal pattern that dies out as time passes or distance increases3.

Why? Some hypotheses:

• Social Learning

• Social Norms

• Social Image

• Conspicuous (Green) Consumption

• Installer Marketing and Canvasing Patterns

1) Dastrup, et al., 2012, European Economic Review2) Bollinger & Gillingham, 2012, Marketing Science3) Gillingham & Graziano, 2014, Journal of Economic Geography

Explanations Have Different ImplicationsExplanation for Adoption Pattern

What We Should Do

Social Norm • Subsidize a few (influential/socially connected) households in each neighborhood.

• Spread information from local opinion surveys

Social Learning • Tailor marketing materials with local info.

• Facilitate neighborhood information sharing (e.g., Solarize CT).

Social Image • Target specific households & neighborhoods

• Green bundling, e.g., with turf replacement

• Build solar neighborhoods (e.g., Ryland Homes)

Conspicuous Consumption • Target specific households & neighborhoods

• Bundle with luxury upgrades

Installer Marketing/Canvasing Patterns

• Reallocate efforts depending on the importance of other factors

1) Dastrup, et al., 2012, European Economic Review2) Bollinger & Gillingham, 2012, Marketing Science3) Gillingham & Graziano, 2014, Journal of Economic Geography

Economics and Social Behavior

Resources spent on “prosocial” behavior increase when perceived motives (e.g., altruism, fairness) are

clearer.

Financial rewards “crowd out”

prosocial behavior by creating doubt

about true motives.

Visibility can reverse the crowd

out problem. Anonymity can make it worse.

Willingness to pay for the appearance of

fairness/altruism can exceed the willingness to pay for truly fair or

altruistic actions.

Benabou & Tirole (2006), Frey & Oberholzer-Gee (1997), Ariely, Bracha, & Meier (2009), Andreoni & Bernheim (2009)

Our Solar Home Demand (Pilot) Study

•Discrete choice experiment survey methodology•Builds on a catalogue of Net Zero home designs developed by the UW Building Energy Research Group (BERG).

A demand survey of

homeowners/homebuyers

•Can we measure the value of social image in the residential solar market?•Can we measure the impact of social image on neighborhood sorting?

Key research questions

•“In order to meet legal obligations to reduce pollution, some utilities will pay homeowners to install solar panels and high-efficiency insulation and windows.”

Embedded experimental

treatment

Online Survey Instrument

Front section: •General questions rating importance of local and national policies, homeownership priorities, general home style preferences.

Information section: •Describes potential energy savings and costs of energy efficiency and solar, health and economic impacts of air pollution from energy production.•Displays images of solar designs with home styles.

Choice section: •Choose between standard home and two alternative versions with different bundles of price, efficiency, solar design, and bill savings. •State preference for neighborhood with more or fewer solar/energy efficient homes.

Debriefing section: •Socioeconomic and demographic questions.

Choice sets

Responses

263 Mountain West homeowners/homebuyers from a survey research panel

45% bought a home within the last year or plan to in the coming year. 55% are longer homeowners.

Age and income roughly reflective of the census.

10% have had a hybrid car at some point, most have heard of Energy Star but not Home Energy Rating System.

No significant differences across treatment groups

Baseline Demand Estimation Results Average willingness to pay for solar ranges between:

$6,000 for standard rooftop solar, low energy efficiency; $16,000 for design-integrated solar, Net Zero Energy.

Willingness to pay for solar is: Higher at better efficiency levels; Greater for design-integrated than standard rooftop.

Difference is smaller at better efficiency ratings.

Respondents demand net bill savings equivalent to between 10% and 20% average annual return.

Polluter script decreases solar demand unless neighborhood has high solar market share

Neighborhood Sorting

Field Experiments: the Way Forward

Randomized control trials are the new frontier of economic science.

• Time-varying electricity prices• Energy consumption feedback• Energy audits• Weatherization assistance

Team with industry, government, and nonprofits to measure true impacts by randomly allocating households to “treatment” and “control” groups:

Can be inexpensive if cleverly designed.

This is not unethical – and is often more fair – if resources are limited.

Proposal: Field Experiments for Solar Adoption

•Select a random sample of neighborhoods, and households within neighborhoods.•Randomly allocate some of these to a control group, and to various treatment groups.

Randomization:

•Send information treatments by mail, door hangers, outreach, etc.•local opinions about solar (social norms)•case study of nearby solar home (social learning)

Installers, utilities, third

parties:

•Offer a discounted demonstration project in treatment neighborhoods.•Vary the system size and number of demo projects, and type of households receiving them, by neighborhood.

Builders/installers:

Proposal: Field Experiments for Solar Adoption

•Initially offer new types of financing to “select homes” (who happen to be randomly chosen).•Measure effect on solar adoption and subsequent net energy consumption in those areas.

Risk aversion vs.

Impatience

•Homebuyers more likely to get energy audits and upgrades when they move – already incurring costs of action.•Offer solar incentives to similar groups of recent movers and non-movers.

Nonmonetary Costs

•Default settings often remain in place – organ donation, retirement plan contributions, utility pricing plans.•Efficient home builders (e.g., Ryland, Meritage) can experiment with opt-out vs. opt-in for the solar option.

Default settings

Conclusions

The demand survey indicates:

• There is a demand for better-looking solar.• Several dimensions of social image are important components of solar demand.• Different “framing” of the same information can lead to different sorting outcomes.

More true field work is needed to verify these findings.

• Randomized control trials across households and neighborhoods offering different • information campaigns• marketing strategies• incentives (and framing of incentives)• financing products

Acknowledgments and Contact Information University of Wyoming Center for Energy

Economics and Public Policy University of Wyoming Presidents Office

Ben Gilbert, bgilbe10@uwyo.edu