Toward an optimal U.S. solar photovoltaic subsidy

Shen Liu, Gregory Colson and Michael Wetzstein

No 196806, 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia from Southern Agricultural Economics Association

Abstract: An analytical framework for assessing the optimal solar energy subsidy is developed and estimated, which takes into account the environment, health, employment, and electricity accessibility benefits. Results indicate that an optimal subsidy is positively affected by the marginal external benefit. However, this effect is mitigated by the elasticity of demand for conventional electricity and elasticity of supply for solar electricity with respect to the solar subsidy. One result indicates when the elasticity of demand is negative, the more responsive fossil energy is to a solar energy subsidy, the higher is the marginal external benefit. Calibrating the model using published elasticities yields estimates of the optimal solar energy subsidy equal to approximately $0.02 per kilowatt hour when employment effects are omitted. The estimated optimal subsidy is in line with many current state feed-in-tariff rates, giving support to these initiatives aimed at fostering solar energy production.

Keywords: Environmental Economics and Policy; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 39
Date: 2015
New Economics Papers: this item is included in nep-ene and nep-env
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Journal Article: Toward an optimal household solar subsidy: A social-technical approach (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:saea15:196806

DOI: 10.22004/ag.econ.196806

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