The positive feedback cycle in the electricity market: Residential solar PV adoption, electricity demand and prices

Micro renewable energy systems (MRES) such as Photovoltaic (PV) are an increasingly important element of National energy strategies. However, the success of these installations has given rise to a positive feedback cycle whereby increased customer adoption results in reduced demand from Utility providers. This leads to price increases and further incentives customers to adopt MRES. This paper investigates the existence of a positive feedback cycle by developing a theoretical model based on simultaneous equations and estimating it using the three stage least squares approach using data from the UK, Australian and Irish Markets. Results indicate strong support for the idea of a positive feedback cycle. This reinforces the need for stakeholders to consider this issue in framing future energy policies to ensure that the adoption of solar PV is supported in a sustainable way, while not punishing non-adopters with higher electricity rates.