Hurdles and Steps: Estimating Demand for Solar Photovoltaics

68 Pages Posted: 12 Feb 2018

Date Written: January 30, 2018

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 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

Suggested Citation

Gillingham, Kenneth and Tsvetanov, Tsvetan, Hurdles and Steps: Estimating Demand for Solar Photovoltaics (January 30, 2018). USAEE Working Paper No. 18-329. Available at SSRN: https://ssrn.com/abstract=3121491 or http://dx.doi.org/10.2139/ssrn.3121491

Kenneth Gillingham (Contact Author)

Yale University ( email )

New Haven, CT 06511
United States
203-436-5465 (Phone)

HOME PAGE: http://www.yale.edu/gillingham

Tsvetan Tsvetanov

University of Kansas ( email )

1415
Lawrence, KS 66045
United States

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