Epsilon Archive for Student Projects

Abstract

The study investigates the effect of government investment subsidies for solar panels on household investment behavior and electricity consumption in single-family homes in Sweden. Using panel data from 2010 to 2023 across Swedish counties, a quantitative approach is applied by combining Fixed Effects regression with a Difference-in-Differences design to estimate both direct and indirect effects of a subsidy form.
Results show that the removal of the investment subsidy in 2021 led to a statistically significant decrease in both the number of solar panel installations and installed capacity. On average, the number of new installations per county declined by approximately 3.8 units annually, representing a drop of up to 25-35% in some regions. Although no significant direct effect on electricity consumption was observed, the analysis reveals a clear indirect effect. Households that installed solar panels reduced their electricity consumption from the grid by an average of 1.77% per additional installation.
The findings indicate that government subsidies play a critical role in driving technology adaptation and indirectly influence household energy behaviour. The study highlights the importance of considering both technical and behavioural mechanisms in the evaluation of climate policy instruments and supports the design of long-term, economically effective, and socially inclusive renewable energy policies.