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Valuing Solar Subsidies

Author

Listed:
  • Bryan Bollinger
  • Kenneth Gillingham
  • A. Justin Kirkpatrick

Abstract

Individuals trade present for future consumption across a range of economic behaviors, and this tradeoff may differ across socioeconomic groups. To assess these tradeoffs, we estimate a dynamic model of residential solar adoption and system sizing in California using household-level data on solar irradiance, electricity consumption, and electricity rates that offer plausibly exogenous variation in the future benefits from adopting relative to upfront costs. We find implicit discount rates of 15.3%, 13.8%, and 10.0% for low-, medium-, and high-wealth households. Counterfactual simulations demonstrate opportunities to reduce the regressivity of solar adoption, increase policy cost-effectiveness, and improve welfare for low-wealth households.

Suggested Citation

  • Bryan Bollinger & Kenneth Gillingham & A. Justin Kirkpatrick, 2025. "Valuing Solar Subsidies," CESifo Working Paper Series 11627, CESifo.
    • Handle: RePEc:ces:ceswps:_11627
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp11627.pdf
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    References listed on IDEAS

    as
    1. Houde, Sébastien & Myers, Erica, 2021. "Are consumers attentive to local energy costs? Evidence from the appliance market," Journal of Public Economics, Elsevier, vol. 201(C).
    2. Robert W. Hahn & Nathaniel Hendren & Robert D. Metcalfe & Ben Sprung-Keyser, 2024. "A Welfare Analysis of Policies Impacting Climate Change," NBER Working Papers 32728, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    solar; discount rates; energy policy; distributional impacts; dynamic discrete choice models;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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