Sun and Lemons: Getting Over Information Asymmetries in the California Solar Market

39 Pages Posted: 16 Oct 2014

Date Written: October 13, 2014

Abstract

Using detailed data of approximately 125,000 solar photovoltaic systems installed in California between 2007 and 2014 I argue that the adoption of solar panels from Chinese manufacturers and the introduction of a leasing model for solar systems are closely intertwined. First, cheaper Chinese panels allowed a leasing model to be profitable for contractors. But an asymmetric information problem exists in the market for solar panels. Solar panels are long-lived productive assets, where quality is important but costly for individual consumers to verify. Consumers can instead be expected to rely on brands and observed reliability. This led to a barrier to entry for cheaper panels from new, primarily Chinese manufacturers. The adoption of a leasing model by several large local installers solved the asymmetric information problem and led to the adoption of Chinese panels and in turn lower overall system prices.

Keywords: Solar panels, asymmetric information problem

JEL Classification: Q00, Q40

Suggested Citation

Mauritzen, Johannes, Sun and Lemons: Getting Over Information Asymmetries in the California Solar Market (October 13, 2014). NHH Dept. of Business and Management Science Discussion Paper No. 2014/35. Available at SSRN: https://ssrn.com/abstract=2510293 or http://dx.doi.org/10.2139/ssrn.2510293

Johannes Mauritzen (Contact Author)

BI Norwegian School of Business ( email )

Nydalsveien 37
Oslo, 0442
Norway

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