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Hurdles and steps: Estimating demand for solar photovoltaics

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  • Kenneth Gillingham
  • Tsvetan Tsvetanov
Abstract
This paper estimates demand for residential solar photovoltaic (PV) systems using a new approach to address three empirical challenges that often arise with count data: excess zeros, unobserved heterogeneity, and endogeneity of price. Our results imply a price elasticity of demand for solar PV systems of −0.65. Counterfactual policy simulations indicate that reducing state financial incentives in half would have led to 9% fewer new installations in Connecticut in 2014. Calculations suggest a subsidy program cost of $364/tCO2 assuming solar displaces natural gas. Our Poisson hurdle approach holds promise for modeling the demand for many new technologies.

Suggested Citation

  • Kenneth Gillingham & Tsvetan Tsvetanov, 2019. "Hurdles and steps: Estimating demand for solar photovoltaics," Quantitative Economics, Econometric Society, vol. 10(1), pages 275-310, January.
    • Handle: RePEc:wly:quante:v:10:y:2019:i:1:p:275-310
    DOI: 10.3982/QE919
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    Cited by:

    1. Carattini, Stefano & Figge, Béla & Gordan, Alexander & Löschel, Andreas, 2024. "Municipal building codes and the adoption of solar photovoltaics," Journal of Environmental Economics and Management, Elsevier, vol. 124(C).
    2. Morakinyo O Adetutu & Kayode A Odusanya & Eleni Stathopoulou & Thomas G Weyman-Jones, 2023. "Environmental regulation, taxes, and activism," Oxford Economic Papers, Oxford University Press, vol. 75(2), pages 460-489.
    3. Gerlagh, Reyer & Hejimans, Roweno J. R. K. & Rosendahl, Knut Einar, 2020. "Endogenous Emission Caps Always Produce a Green Paradox," Working Paper Series 4-2020, Norwegian University of Life Sciences, School of Economics and Business.
    4. Joan Costa‐Font & Cristina Vilaplana‐Prieto, 2020. "‘More than one red herring'? Heterogeneous effects of ageing on health care utilisation," Health Economics, John Wiley & Sons, Ltd., vol. 29(S1), pages 8-29, October.
    5. Gillingham, Kenneth & Tsvetanov, Tsvetan, 2018. "Nudging energy efficiency audits: Evidence from a field experiment," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 303-316.
    6. Jacquelyn Pless & Arthur A. van Benthem, 2019. "Pass-Through as a Test for Market Power: An Application to Solar Subsidies," American Economic Journal: Applied Economics, American Economic Association, vol. 11(4), pages 367-401, October.
    7. Bishop, Kelly C. & Kiribrahim-Sarikaya, Ozgen, 2024. "Energy-efficient investments in housing," Regional Science and Urban Economics, Elsevier, vol. 107(C).
    8. Xingchi Shen & Yueming Lucy Qiu & Pengfei Liu & Anand Patwardhan, 2022. "The Effect of Rebate and Loan Incentives on Residential Heat Pump Adoption: Evidence from North Carolina," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(3), pages 741-789, July.
    9. Palm, Alvar & Lantz, Björn, 2020. "Information dissemination and residential solar PV adoption rates: The effect of an information campaign in Sweden," Energy Policy, Elsevier, vol. 142(C).
    10. Best, Rohan & Marrone, Mauricio & Linnenluecke, Martina, 2023. "Meta-analysis of the role of equity dimensions in household solar panel adoption," Ecological Economics, Elsevier, vol. 206(C).
    11. Ros, Agustin J. & Sai, Sai Shetty, 2023. "Residential rooftop solar demand in the U.S. and the impact of net energy metering and electricity prices," Energy Economics, Elsevier, vol. 118(C).
    12. Reyer Gerlagh & Roweno J.R.K. Heijmans & Knut Einar Rosendahl, 2019. "Endogenous Emission Caps Always Induce a Green Paradox," CESifo Working Paper Series 7862, CESifo.
    13. Kenneth T. Gillingham & Bryan Bollinger, 2021. "Social Learning and Solar Photovoltaic Adoption," Management Science, INFORMS, vol. 67(11), pages 7091-7112, November.
    14. Best, Rohan & Burke, Paul J. & Nishitateno, Shuhei, 2019. "Evaluating the effectiveness of Australia's Small-scale Renewable Energy Scheme for rooftop solar," Energy Economics, Elsevier, vol. 84(C).
    15. Abajian, Alexander & Pretnar, Nick, 2023. "Subsidies for Close Substitutes: Evidence from Residential Solar Systems," MPRA Paper 118171, University Library of Munich, Germany.
    16. Li, Yumin, 2018. "Incentive pass-through in the California Solar Initiative – An analysis based on third-party contracts," Energy Policy, Elsevier, vol. 121(C), pages 534-541.
    17. Best, Rohan & Li, Han & Trück, Stefan & Truong, Chi, 2021. "Actual uptake of home batteries: The key roles of capital and policy," Energy Policy, Elsevier, vol. 151(C).
    18. Gao, Xue, 2021. "The comparative impact of solar policies on entrepreneurship in the U.S. solar photovoltaic installation industry," Energy Policy, Elsevier, vol. 156(C).
    19. Gerlagh, Reyer & Heijmans, Roweno J.R.K. & Rodendahl, Knut Einar, 2019. "Endogenous Emission Caps Always Induce a Green Paradox," Other publications TiSEM a629a851-9ea0-4022-aa1b-c, Tilburg University, School of Economics and Management.
    20. Best, Rohan & Chareunsy, Andrea & Li, Han, 2021. "Equity and effectiveness of Australian small-scale solar schemes," Ecological Economics, Elsevier, vol. 180(C).
    21. Bryan Bollinger & Naim Darghouth & Kenneth Gillingham & Andres Gonzalez-Lira, 2023. "Valuing Technology Complementarities: Rooftop Solar and Energy Storage," NBER Working Papers 32003, National Bureau of Economic Research, Inc.
    22. Reyer Gerlagh & Roweno J R K Heijmans & Knut Einar Rosendahl, 2021. "An endogenous emissions cap produces a green paradox [Combining price and quantity controls under partitioned environmental regulation]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 36(107), pages 485-522.
    23. Bukow, Veronique Clara, 2022. "Demand Estimation for Solar Photovoltaics in the United States – An Instrumental Variable Approach," Junior Management Science (JUMS), Junior Management Science e. V., vol. 7(3), pages 643-667.
    24. Sébastien Houde & Wenjun Wang, 2022. "The Incidence of the U.S.-China Solar Trade War," CER-ETH Economics working paper series 22/372, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    25. Kenneth Gillingham & James H. Stock, 2018. "The Cost of Reducing Greenhouse Gas Emissions," Journal of Economic Perspectives, American Economic Association, vol. 32(4), pages 53-72, Fall.

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