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Hurdles and steps: Estimating demand for solar photovoltaics

Kenneth Gillingham () and Tsvetan Tsvetanov

Quantitative Economics, 2019, vol. 10, issue 1, 275-310

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% 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.

Date: 2019
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