Financial modeling of consumer discount rate in residential solar photovoltaic purchasing decisions

Abstract

Diffusion of microgeneration technologies, particularly rooftop photovoltaic (PV), represents a key option in reducing emissions in the residential sector. This thesis uses a uniquely rich dataset from the burgeoning residential PV market in Texas to study the nature of the consumer’s decision-making process in the adoption of these technologies. Focusing on the financial metrics and the information decision makers use to base their decisions upon, I study how the leasing and buying models affect individual choices and, thereby, the adoption of capital-intensive energy technologies. Overall, the leasing model is found to more effectively address consumers’ informational requirements. Contrary to previous studies, buyers and lessees of PV are not found to substantially differ along socio-demographic variables, though they do differ significantly along cash availability, levels of environmental concern, and relative importance of financial aspects. Instead, the leasing model has opened up the residential PV market to a new, and potentially very large, consumer segment—those with a tight cash flow situation.