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The Surprising Pass-Through of Solar Subsidies

Jacquelyn Pless () and Arthur Van Benthem

No 11908, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We estimate the pass-through of solar energy subsidies to solar system prices. Rich micro-level transaction and subsidy data from California indicate that pass-through is remarkably high and differs substantially for consumers who buy versus lease solar systems. Buyers capture nearly the full subsidy, while there is more-than-complete pass-through to lessees. We formalize pass-through over-shifting as an under-utilized test for market power that can also be applied in other contexts. We rule out alternative explanations for over-shifting and conclude that our estimates provide evidence for imperfectly competitive solar markets. Our findings have implications for the distributional effects of energy subsidies.

Keywords: buy vs. lease; demand curvature; market power; over-shifting; Pass-Through; solar subsidy; third-party ownership (search for similar items in EconPapers)
JEL-codes: H22 Q42 Q48 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene
Date: 2017-03
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