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Solar Power is Contagious: Installing Panels
Often Means Your Neighbors Will Too

by Brad Plumer
Vox, October 24, 2014

Solar power still generates just 0.4 percent of America's electricity. But it's expanding at a shocking rate, with a new rooftop system installed every four minutes. There are lots of reasons for that, from lower costs to federal subsidies to innovative financing schemes.

But here's another unexpected factor: Solar power appears to be contagious. Yes, contagious. If you install solar photovoltaic panels on your roof, that greatly increases the odds that your neighbors will, in turn, install their own panels.

That's the upshot of a fascinating new paper in The Journal of Economic Geography looking at the growth of rooftop solar power across Connecticut. Rooftop solar took hold in a few initial spots back in 2005 -- when the state first started offering solar subsidies. Rooftop systems then spread out from those clusters over time in a "wave-like centrifugal pattern":

The growth of solar power in Connecticut, 2005-2013 The growth of solar power in Connecticut, 2005-2013

The researchers, Marcello Graziano of the University of Connecticut and Kenneth Gillingham of Yale, tried to figure out why solar power would expand in this way. Maybe solar power was just concentrating in large population centers. But this turned out not to be true -- in fact, solar power was growing more rapidly in small- and medium-sized population areas.

Another possibility was that solar power was just proliferating in the rich parts of the state, among the households who could afford it. But that wasn't true either. Households of all income levels are adopting solar power -- there wasn't a strong relationship between income and adoption rates.

After more careful examination, the researchers concluded that the evidence points in one direction -- there are "neighbor effects." Specifically, adding one rooftop system on a block increased the average number of installations within a half mile radius by 0.44. This builds on previous research finding similar effects in California.

How solar power contagion works

This makes some intuitive sense. Most people still don't know much about solar power. They don't know how the subsidies work and don't know if it makes much financial sense for them personally. But if you see that your neighbor is putting up panels, suddenly the possibility becomes more concrete. You can talk to the neighbors, find out more, think about whether it makes sense for you.

It's also possible that there's a competition effect -- green-minded households don't want to be one-upped by their neighbors installing panels. So they go buy their own.

Now, granted, neighborhood effects certainly aren't the only reason solar power is spreading. In Connecticut, there are a bunch of key factors. The state began offering financial incentives for people who install rooftop systems in 2005. Crucially, the state also has very high electricity costs (which means that solar panels make more sense for some people). Connecticut also had a number of "Solarize" programs, starting in 2012, that spread the word among select towns and let those towns engage in "group pricing" -- essentially letting communities buy in bulk. Those programs were very good at spreading word of mouth.

But neighbor effects -- the contagious aspect -- seem to be important, and they've been seen in other places, as well, including Austin, Texas and all across California. (Indeed, this latest paper wasn't the first to find neighborhood effects for solar, but it's possibly the most detailed yet.)

Solar analysts have suggested that this bodes well for the future of the technology. In a recent interview, Shayle Kann, senior vice president of GTM Research, told me that one of the biggest costs for solar installers was simply finding new customers. Companies like SolarCity -- which allow people to lease panels for no upfront cost and pay monthly fees -- typically camp out at places like Home Depot.

But as solar power grows, word of mouth spreads, and referrals increase, those sign-up costs should come down. And, indeed, this reduction in "balance of systems" costs -- all the costs of solar power that aren't the panels themselves -- is a big reason why the price of solar power keeps declining.

Brad Plumer
Solar Power is Contagious: Installing Panels Often Means Your Neighbors Will Too
Vox, October 24, 2014

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