How Cost-Effective Were Subsidies for Solar Energy in Germany?

We study Germany’s photovoltaic (PV) subsidy program, estimating a dynamic model of new technology adoption which accounts for heterogeneity in residential ownership structures. We find that homeowner and landlord investors heavily discount future benefits, highlighting the suboptimality of the feed-in tariff structure and the inefficient use of government funds. The high administrative costs associated with tenant electricity contracts strongly discourage landlords from investing in new energy technologies. Our analysis suggests that policy design should prioritize upfront investment subsidies over feed-in tariffs to promote renewable energy adoption. Reducing administrative costs associated with tenant electricity programs is key to unlock investments by landlords and expand tenants’ access to solar energy, thereby enhancing cost-effectiveness.

von Ditfurth, Jakob und Sebastian Rausch (2025), How Cost-Effective Were Subsidies for Solar Energy in Germany?, ZEW Discussion Paper Nr. 25-018, Mannheim.