IDEAS home Printed from https://ideas.repec.org/a/zbw/jumsac/294998.html
   My bibliography  Save this article

Demand Estimation for Solar Photovoltaics in the United States – An Instrumental Variable Approach

Author

Listed:
  • Bukow, Veronique Clara

Abstract

Worldwide the demand for solar photovoltaics (PV) has increased significantly over the past decades. This was driven by a price reduction for solar PV systems. A two-stage least squares linear regression yields insights into the price sensitivity for residential customers in the U.S., and California in particular. The specification includes instrumental variables as well as fixed effects to account for the common issues of endogeneity and data heterogeneity in demand estimation problems, respectively. The variation in the sales tax rate on solar PV and the movements of polysilicon spot prices are used to instrumentalise PV price changes. The regression results imply an inelastic demand with a long-term price elasticity of -0.443, accounting for differences over state and time. Investigating price elasticities for various income groups shows that lower-income customers react more strongly to price changes compared to those with relatively high income (-0.521 vs. -0.195). Likewise, regions with lower population density are more sensitive to price changes (-0.473 vs. -0.338). Besides price, installation costs and technological efficiency majorly impact the system size installed. Results of this study can provide data-driven guidance to efficient policy design and pricing strategies.

Suggested Citation

  • Bukow, Veronique Clara, 2022. "Demand Estimation for Solar Photovoltaics in the United States – An Instrumental Variable Approach," Junior Management Science (JUMS), Junior Management Science e. V., vol. 7(3), pages 643-667.
    • Handle: RePEc:zbw:jumsac:294998
    DOI: 10.5282/jums/v7i3pp643-667
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/294998/1/5156-3421.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.5282/jums/v7i3pp643-667?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kenneth Gillingham & Tsvetan Tsvetanov, 2019. "Hurdles and steps: Estimating demand for solar photovoltaics," Quantitative Economics, Econometric Society, vol. 10(1), pages 275-310, January.
    2. Marcello Graziano & Kenneth Gillingham, 2015. "Spatial patterns of solar photovoltaic system adoption: The influence of neighbors and the built environment," Journal of Economic Geography, Oxford University Press, vol. 15(4), pages 815-839.
    3. Kahn, Matthew E & Matsusaka, John G, 1997. "Demand for Environmental Goods: Evidence from Voting Patterns on California Initiatives," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 137-173, April.
    4. Jaforullah, Mohammad & King, Alan, 2015. "Does the use of renewable energy sources mitigate CO2 emissions? A reassessment of the US evidence," Energy Economics, Elsevier, vol. 49(C), pages 711-717.
    5. Miller, Mark & Alberini, Anna, 2016. "Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: Evidence from U.S. Data," Energy Policy, Elsevier, vol. 97(C), pages 235-249.
    6. Mingfeng Lin & Henry C. Lucas & Galit Shmueli, 2013. "Research Commentary ---Too Big to Fail: Large Samples and the p -Value Problem," Information Systems Research, INFORMS, vol. 24(4), pages 906-917, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abajian, Alexander & Pretnar, Nick, 2023. "Subsidies for Close Substitutes: Evidence from Residential Solar Systems," MPRA Paper 118171, University Library of Munich, Germany.
    2. Ros, Agustin J. & Sai, Sai Shetty, 2023. "Residential rooftop solar demand in the U.S. and the impact of net energy metering and electricity prices," Energy Economics, Elsevier, vol. 118(C).
    3. Kenneth T. Gillingham & Bryan Bollinger, 2021. "Social Learning and Solar Photovoltaic Adoption," Management Science, INFORMS, vol. 67(11), pages 7091-7112, November.
    4. Hsin-Han Chen & Hui-Ling Chen & Yi-Tien Lin & Chaou-Wen Lin & Chien-Chang Ho & Hsueh-Yi Lin & Po-Fu Lee, 2020. "The Associations between Functional Fitness Test Performance and Abdominal Obesity in Healthy Elderly People: Results from the National Physical Fitness Examination Survey in Taiwan," IJERPH, MDPI, vol. 18(1), pages 1-14, December.
    5. Carattini, Stefano & Gillingham, Kenneth & Meng, Xiangyu & Yoeli, Erez, 2024. "Peer-to-peer solar and social rewards: Evidence from a field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 340-370.
    6. Wan, Qilong & Qian, Jine & Baghirli, Araz & Aghayev, Aligul, 2022. "Green finance and carbon reduction: Implications for green recovery," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 901-913.
    7. Dorothée Charlier & Sondès Kahouli, 2019. "From Residential Energy Demand to Fuel Poverty: Income-induced Non-linearities in the Reactions of Households to Energy Price Fluctuations," The Energy Journal, , vol. 40(2), pages 101-138, March.
    8. Li, Yumin, 2018. "Incentive pass-through in the California Solar Initiative – An analysis based on third-party contracts," Energy Policy, Elsevier, vol. 121(C), pages 534-541.
    9. Fredriksson, Per G. & List, John A. & Millimet, Daniel L., 2003. "Bureaucratic corruption, environmental policy and inbound US FDI: theory and evidence," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1407-1430, August.
    10. Neij, Lena & Heiskanen, Eva & Strupeit, Lars, 2017. "The deployment of new energy technologies and the need for local learning," Energy Policy, Elsevier, vol. 101(C), pages 274-283.
    11. Wang, Haoluan, 2017. "Land Conservation for Open Space: The Impact of Neighbors and the Natural Environment," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258125, Agricultural and Applied Economics Association.
    12. Yen-Chun Chou & Howard Hao-Chun Chuang, 2018. "A predictive investigation of first-time customer retention in online reservation services," Service Business, Springer;Pan-Pacific Business Association, vol. 12(4), pages 685-699, December.
    13. Tang, Kayu & Parsons, David J. & Jude, Simon, 2019. "Comparison of automatic and guided learning for Bayesian networks to analyse pipe failures in the water distribution system," Reliability Engineering and System Safety, Elsevier, vol. 186(C), pages 24-36.
    14. Sujin Park & Ali Tafti & Galit Shmueli, 2024. "Transporting Causal Effects Across Populations Using Structural Causal Modeling: An Illustration to Work-from-Home Productivity," Information Systems Research, INFORMS, vol. 35(2), pages 686-705, June.
    15. Claire Teunenbroek & René Bekkers & Bianca Beersma, 2021. "They ought to do it too: Understanding effects of social information on donation behavior and mood," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 18(2), pages 229-253, June.
    16. Du, Hua & Han, Qi & de Vries, Bauke & Sun, Jun, 2024. "Community solar PV adoption in residential apartment buildings: A case study on influencing factors and incentive measures in Wuhan," Applied Energy, Elsevier, vol. 354(PA).
    17. Gautam, Tej K. & Paudel, Krishna P., 2018. "The demand for natural gas in the Northeastern United States," Energy, Elsevier, vol. 158(C), pages 890-898.
    18. Palm, Alvar & Lantz, Björn, 2020. "Information dissemination and residential solar PV adoption rates: The effect of an information campaign in Sweden," Energy Policy, Elsevier, vol. 142(C).
    19. Francisco García-Lillo & Eduardo Sánchez-García & Bartolomé Marco-Lajara & Pedro Seva-Larrosa, 2023. "Renewable Energies and Sustainable Development: A Bibliometric Overview," Energies, MDPI, vol. 16(3), pages 1-22, January.
    20. Khalilzadeh, Jalayer & Tasci, Asli D.A., 2017. "Large sample size, significance level, and the effect size: Solutions to perils of using big data for academic research," Tourism Management, Elsevier, vol. 62(C), pages 89-96.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:jumsac:294998. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://jums.academy/en/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.