Slashing the surplus - how prosumers with smart metering respond to regulatory restrictions on self-consumption in Croatia

With the diffusion of prosumerism, where households act both as producers and consumers of energy, policy makers must strike a balance between encouraging microgeneration and regulating this new prosumer segment on the energy market. However, effective policy implementation depends on prosumers’ behavioural reactions. This paper provides evidence on the interplay between digital real-time information and regulation of self-consumption for rooftop photovoltaics (PV) in Croatia. Croatian households that produce more annual electricity than they consume are automatically re-classified as renewable traders, which means additional administrative duties and less favorable tax treatment. This creates perverse incentives to reduce PV generation or increase energy consumption by year-end. We document the behavioural reactions to this policy design, indicating that energy production and consumption are highly elastic regarding regulatory incentives, but only if these incentives are made transparent and accessible with timely information. We collected two survey waves (n = 54 and n = 80) and smart meter data (n = 39), which illustrate the behavioural reaction before and after year-end. According to the survey wave before year-end, almost half of the participants considered curtailing their PV output. According to the smart meter data, a sizable share did indeed take action by shutting down PV production or by powering additional devices to reduce the surplus near year-end. In a second survey wave in the new year, prosumers provide ex-post insights on the specific measures taken to reduce surplus. We discuss research insights regarding the transparency and control offered by metering feedback, and how this can influence household behaviour within regulatory frameworks.