South-Western EconNews

It May be Efficient; I Just Don't Want to See It

Subject

Construction of Solar Panels Imposes a Negative Externality on Neighboring Property Owners

Topic

Supply and Demand; Economics and the Environment

Key Words

Negative Externality; Demand; Supply

News Story

While many people support the use of solar power, they don't want their neighbors to use it. The primary argument these opponents offer is that the unattractiveness of the solar panels reduces surrounding properties' values. The presence of this negative externality has caused some homeowners' associations to enact restrictions against the use of solar panels on association-members' homes. In fact, a number of associations have tried to take members to court to prevent the construction of solar panels on houses, especially given the significant increase in power generation from solar energy over the last 10 years.

In response, solar-panel manufacturers have begun creating panels that look increasingly like roofing materials such as shingles or skylights.

(Updated April, 2004)

Questions

1.	Given the increase in energy creation from solar energy, what is happening to the price of solar energy panels? Use a graph of supply and demand to support your answer.
2.	Neighbors argue that solar panels on a house are unsightly and reduce the value of their own properties. Use a graph of social and private benefits and costs to illustrate the neighbors' arguments.
3.	The problem of NIMBY (not in my backyard) is a common one in many aspects of public policy. Is there a clear solution to the problem that many governments face - many people are supportive of an idea, as long as they do not have to see its effects? Write a short essay detailing your answer.

Source

Jim Carlton, "Most People Favor Solar Power, But Not in Their Neighborhood." The Wall Street Journal. 25 February 2004.