Hurdles and Steps: Estimating Demand for Solar Photovoltaics

Hurdles and Steps: Estimating Demand for Solar Photovoltaics
Friday, February 13, 2015 - 10:00am - 12:00pm
10:00 am
12:00 pm
Tsvetan Tsvetanov
UCLA Luskin School of Public Affairs, 3333
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Date: 
Fri, 02/13/2015 - 10:00am - 12:00pm
Presented By: 
Tsvetan Tsvetanov

Location

UCLA Luskin School of Public Affairs, 3333
United States

Hurdles and Steps:Estimating Demand for Solar Photovoltaics

Tsvetan Tsvetanov, Yale University

Kenneth Gillingham, Yale University

November 12, 2014

JOB MARKET PAPER: Abstract

Hurdles and Steps:Estimating Demand for Solar Photovoltaics

Tsvetan Tsvetanov, Yale University

Kenneth Gillingham, Yale University

November 12, 2014

JOB MARKET PAPER: Abstract

In light of the steadily decreasing step schedule of financial incentives for solar photovoltaic (PV) installations in a number of states, understanding the demand for residential PV systems is important for both policymakers and firms. This paper estimates residential solar demand in Connecticut using a new approach to address three empirical challenges that can arise with count data in our setting: excess zeros, unobserved heterogeneity, and endogeneity of price. We develop a Poisson hurdle model that allows for both fixed effects and instrumental variable estimation. Our results imply a nearly unitary price elasticity of demand for solar PV systems of -1.03. Counterfactual policy simulations suggest that the number of new installations in Connecticut in 2013 would have been 35 percent less than observed in the absence of state financial incentives. Policies to eliminate permitting costs, such as those implemented in several states, would have increased the number of new installations by 1.5 percent.