Optimal Subsidies for Residential Solar

Mark Colas and Emmett Saulnier

No 10446, CESifo Working Paper Series from CESifo

Abstract: We study the optimal design of spatially-differentiated subsidies for residential solar panels. We build a structural model of solar panel demand and electricity production across the US and estimate the model by combining 1) remotely sensed data on residential solar panels, 2) power-plant-level data on hourly production and emissions, and 3) a state-of-the-art air pollution model. The current subsidies lead to severe spatial misallocation. The optimal cost-neutral reform generates a 6-11% increase in the environmental benefits of residential solar panels. National funding for subsidies under the current system exceeds the unconstrained optimum by over ten-fold.

Keywords: rooftop solar; optimal taxation; renewable energy (search for similar items in EconPapers)
JEL-codes: H21 H23 Q42 Q48 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10446

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