Means-Tested Solar Subsidies

Mark Colas and Emmett Reynier

No 11378, CESifo Working Paper Series from CESifo

Abstract: We study the optimal design of income-contingent subsidies for residential solar panels. Using remotely sensed data on solar panel installations across the contiguous US and a border-discontinuity design, we estimate that the responsiveness of installation rates to subsidies is strongly decreasing in income. Using these empirical elasticities, we estimate a model that embeds a solar panel installation decision into a dynamic consumption/savings framework with borrow-ing constraints. Counterfactual simulations reveal that switching to production-maximizing income-contingent subsidies leads to a three-fold increase in public funds received by low-income households and a 2.4% increase in national solar production. Means-tested subsidies are justified on both equity and efficiency grounds.

Keywords: rooftop solar; subsidies; renewable energy (search for similar items in EconPapers)
JEL-codes: H21 H23 Q42 Q48 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11378

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