>It didn't make sense all along.
Let me rephrase.
What I mean is, "or it would make sense to do it, but homeowners will be too stupid to do the math." My hypothetical is about people who 1) would not install panels but 2) installing panels would be in their individual interest.
I agree that PV technology has improved in price/efficiency.
>Many people are not quantitatively analytical, even in situations where such analysis is in their material self-interest.
That's a fair point. You're entirely right - some people will not think about it. Some people will think about it but be wrong.
My intuition is that people are still better at making the the decision themselves than if the decision is made legislatively. Let me explain why.
Firstly, I'm skeptical of residential solar. Why? Installation costs (on average) 59 cents/watt. [1] This would be cheaper if it were on the ground rather than on a roof. There is lots of cheap land (assuming that you don't care that it's out in the boonies.) You could put solar panels there instead. However, there is an incentive to put solar panels on a roof: net metering. The utility must buy the residential solar, even if it's useless to them. I think that this is a misaligned incentive, and it might be more efficient to have huge fields of solar panels than to have solar panels on each house.
Second, this seems like something with limited political accountability. It seems like they could have created an alternate way of complying: pay the government enough money to build an equivalent amount of solar somewhere else. Then, you can remove the exception for shaded houses/tall buildings, because they have a non-stupid way of complying. This seems like it's better for everyone involved. However, it would then be clear how much money the policy costs, rather than "homes have gotten more expensive, but it's hard to pin down how much of that is caused by the policy and how much is other factors."
[1]: http://emp.lbl.gov/sites/all/files/german-us-pv-price-ppt.pd...