Hurdles and Steps: Estimating Demand for Solar Photovoltaics
68 Pages Posted: 12 Feb 2018
Date Written: January 30, 2018
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 percent 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.
Keywords: count data; hurdle model; fixed effects; instrumental variables; Poisson; energy policy
JEL Classification: Q42, Q48, C33, C36
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