Abstract: This paper examines the effect of electricity prices on residential solar photovoltaic installations. I use the UK energy crisis, which began in August 2021, as a natural experiment to estimate the causal effect of short-run electricity price fluctuations on residential solar PV adoption, exploiting the exogenous variation in electricity prices driven by global natural gas price shocks. Using a monthly-frequency panel dataset at the parliamentary constituency level, obtained via an Environmental Information Regulations request to the Department for Energy Security and Net Zero (EIR2025/18097), this paper estimates a dynamic distributed lag model with constituency and year fixed effects. The preferred specification, a Pseudo-Poisson Maximum Likelihood model, estimates a cumulative elasticity of 0.541, significant at the 1% level, indicating households respond inelastically to short-run electricity price shocks. This represents a substantial decline in elasticity relative to that observed in the early 2010s, when solar cell prices were substantially higher. Heterogeneity analysis finds that elasticity decreases monotonically with rurality once level effects are accounted for, while finding a threshold effect in elasticities with insolation.
