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Hurdles and steps: Estimating demand for solar photovoltaics
Kenneth Gillingham and 1 other contributor
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Gillingham, K. ., & Tsvetanov, T. . (2019). Hurdles and steps: Estimating demand for solar photovoltaics. QUANTITATIVE ECONOMICS, 10(1), 275-310. https://doi.org/10.3982/QE919 (Original work published 2024)
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/tCO(2) assuming solar displaces natural gas. Our Poisson hurdle approach holds promise for modeling the demand for many new technologies.