How Do Domestic Solar PV Users Respond to Price and Temperature Shocks? Evidence from Italy Between 2021–2022

The use of renewable energy sources, the energy crisis, and the increased frequency and intensity of high-heat events are changing the conditions under which European households consume energy services for their thermal comfort. Leveraging high-frequency residential electricity consumption from more than 10,000 households in a municipality in northern Italy between 2021 and 2022, we show that solar photovoltaics (PV) adoption reduces grid electricity consumption, during high-price and high-temperature events, enhancing energy security and affordability. We evaluate the environmental benefits of PV adoption using the global estimates of the Social Cost of Carbon (SCC) to monetize the value of avoided negative externalities due to GHG emissions. The adoption of PV by an average household in Brescia saves up to 544 kg of CO2 in a year, leading to a reduction of environmental damage for a value of 166-266/year. Furthermore, based on our estimated demand functions, we measure significant differences in the loss of price-induced consumer surplus for households with and without PV, which amounts to between 133 and 300, respectively, highlighting substantial private benefits from PV adoption during price fluctuations. Our findings underscore the need for targeted policies that expand access to residential PV systems, not only to support climate goals but also to mitigate energy poverty by shielding vulnerable households from extreme fluctuations in electricity prices.