When the carrot goes bad: The effect of solar rebate uncertainty

Although meant to encourage investment in solar photovoltaic (PV) systems, some incentive policies may themselves become a barrier in instances where policy-related uncertainty is present, as potential solar adopters delay their investment until uncertainty is resolved. This study utilizes a quasi-experimental setting to quantify the effect of solar policy uncertainty. Focusing on the California Solar Initiative's residential rebate program, I exploit the temporary exhaustion of funds within one of the utility territories as an exogenous source of increased uncertainty and estimate that it leads to a 67% drop in rebate applications in an average ZIP code-week. There is considerable heterogeneity in this effect depending on household income and PV system size. Among households that are least likely to invest in PV without a rebate incentive, program participation drops by up to 69%. This suggests potentially significant loss in program effectiveness due to lower PV adoption and underscores the importance of accounting for uncertainty in policy evaluations. •Uncertainty about solar incentive programs can delay program participation.•I quantify the drop in solar rebate applications due to increased uncertainty.•I estimate a 67% reduction in average rebate take-up.•The number of new installations can decline by up to 69% among some households.