The blind spot stopping households from installing solar power

OPINION: New research led by Macquarie Business School suggests government programs to subsidise the cost of solar panels for low-income households may not be the best way to boost the uptake of solar energy.

Solar energy is a no-brainer for households keen to dramatically cut electricity bills and reduce their carbon footprint.

But home ownership and the high cost of installing panels mean many Australian households miss out on the economic and environmental benefits of solar power.

Government schemes to encourage households to adopt solar energy are typically designed to make it more affordable for low-income earners.

The NSW government's "Solar Low Income Households" scheme (now closed), for example, provided eligible low-income households with a free three-kilowatt solar system in exchange for giving up the Low-Income Household Rebate for 10 years.

Lowering the cost of solar panels is important, but our research suggests policymakers should also consider the levels of household wealth on the adoption of solar power - especially for people who rent or have a low level of saving

Boosting the uptake of solar panels requires policies that consider a household's total financial picture, including their assets.

We examined more than 230 studies on household solar adoption and found that while income is frequently studied, its impact on solar panel adoption is mixed and context dependent.

In contrast, households with greater wealth - capital assets such as home ownership or savings - were more likely to adopt solar energy. However, the impact of capital on the take up of solar power is under-researched compared to income.

This omission may have significant policy implications as governments develop subsidy schemes based primarily on income.

Wealth vs income

Income is money flowing regularly into households, such as wages or welfare, which can then cover frequent expenses. In contrast, wealth includes assets like housing, savings and financial investments. These assets can cover larger, one-off purchases.

The Solar Choice Price Index shows that a seven kilowatt system costs around $6,800 in total, although the price will depend on factors such as the type of solar panels and the location.

A low-income but high-wealth household can more easily afford solar panels compared to a high-income household with low wealth.

Boosting the uptake of solar panels requires policies that consider a household's total financial picture, including their assets.

A key policy design change would be to account for assets. This can include means-testing based on assets and having payment amounts which differ across tiers of recipients. The age pension Asset Test provides an example of how financial assets can be used to determine eligibility.

The Australian Capital Territory government's Sustainable Household Scheme, for example, targets subsidies at households below a specified asset threshold.

• Who's hiring? Jobs analysis unveils workers in demand
• Why are some people financially resilient more than others?

In addition, there is a need to substantially increase renter access to solar panels. European countries provide an example: more than half a million plug-in solar systems exist in Germany.

Solar energy schemes for renters could also include an asset test to determine subsidy availability.

By focusing on assets in future policies, governments can create a more inclusive solar-panel market, helping to reduce energy inequality and accelerating the transition to a more sustainable energy future across the world.

Mauricio Marrone is an Associate Professor in the Department of Actuarial Studies and Business Analytics at Macquarie Business School.

Rohan Best is a Senior Lecturer in the Department of Economics at Macquarie Business School.

Share