IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v121y2018icp534-541.html
   My bibliography  Save this article

Incentive pass-through in the California Solar Initiative – An analysis based on third-party contracts

Author

Listed:
  • Li, Yumin

Abstract

Many utilities and states have implemented incentives for residential solar to reduce the high upfront cost. There is a growing body of literature evaluating the extent of this corresponding price reduction, termed ‘incentive pass-through’, typically finding nearly complete path-through for host-owned systems. However, few studies hitherto had the data to reliably estimate path-through for third-party owned systems, which comprise most of new installations over this period. This study evaluates incentive pass-through for third-party owned systems in California between 2010 and 2014. The estimation results show path-through rate is around 62%, suggesting that unlike host-owned systems, a portion of the incentive reduced the contract price of the system and the rest of the incentive was retained by the installer. This study has important implications for future subsidy program design in the presence of different ownership types in the market.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:enepol:v:121:y:2018:i:c:p:534-541
    DOI: 10.1016/j.enpol.2018.07.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421518304592
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2018.07.015?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Marion, Justin & Muehlegger, Erich, 2011. "Fuel tax incidence and supply conditions," Journal of Public Economics, Elsevier, vol. 95(9), pages 1202-1212.
    2. Natalia Fabra & Mar Reguant, 2014. "Pass-Through of Emissions Costs in Electricity Markets," American Economic Review, American Economic Association, vol. 104(9), pages 2872-2899, September.
    3. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Causes and Consequences of the Export Enhancement Program for Wheat," NBER Chapters, in: The Effects of US Trade Protection and Promotion Policies, pages 273-296, National Bureau of Economic Research, Inc.
    4. Dong, Changgui & Wiser, Ryan & Rai, Varun, 2018. "Incentive pass-through for residential solar systems in California," Energy Economics, Elsevier, vol. 72(C), pages 154-165.
    5. Jonathan E. Hughes & Molly Podolefsky, 2015. "Getting Green with Solar Subsidies: Evidence from the California Solar Initiative," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(2), pages 235-275.
    6. Jacquelyn Pless & Arthur A. van Benthem, 2019. "Pass-Through as a Test for Market Power: An Application to Solar Subsidies," American Economic Journal: Applied Economics, American Economic Association, vol. 11(4), pages 367-401, October.
    7. Pinelopi Koujianou Goldberg & Rebecca Hellerstein, 2008. "A Structural Approach to Explaining Incomplete Exchange-Rate Pass-Through and Pricing-to-Market," American Economic Review, American Economic Association, vol. 98(2), pages 423-429, May.
    8. Kenneth Gillingham & Tsvetan Tsvetanov, 2019. "Hurdles and steps: Estimating demand for solar photovoltaics," Quantitative Economics, Econometric Society, vol. 10(1), pages 275-310, January.
    9. Cameron, A. Colin & Gelbach, Jonah B. & Miller, Douglas L., 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(2), pages 238-249.
    10. Sarzynski, Andrea & Larrieu, Jeremy & Shrimali, Gireesh, 2012. "The impact of state financial incentives on market deployment of solar technology," Energy Policy, Elsevier, vol. 46(C), pages 550-557.
    11. FRANK VERBOVEN & THEON van DIJK, 2009. "Cartel Damages Claims And The Passing‐On Defense," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 457-491, September.
    12. Sonia Jaffe & E. Glen Weyl, 2013. "The First-Order Approach to Merger Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 188-218, November.
    13. Meghan R. Busse & Christopher R. Knittel & Florian Zettelmeyer, 2013. "Are Consumers Myopic? Evidence from New and Used Car Purchases," American Economic Review, American Economic Association, vol. 103(1), pages 220-256, February.
    14. Severin Borenstein, 2017. "Private Net Benefits of Residential Solar PV: The Role of Electricity Tariffs, Tax Incentives, and Rebates," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(S1), pages 85-122.
    15. Poterba, James M., 1996. "Retail Price Reactions to Changes in State and Local Sales Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(2), pages 165-176, June.
    16. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528-583.
    17. Donghun Kim & Ronald W. Cotterill, 2008. "Cost Pass‐Through In Differentiated Product Markets: The Case Of U.S. Processed Cheese," Journal of Industrial Economics, Wiley Blackwell, vol. 56(1), pages 32-48, March.
    18. Catherine A. Durham & Bonnie G. Colby & Molly Longstreth, 1988. "The Impact of State Tax Credits and Energy Prices on Adoption of Solar Energy Systems," Land Economics, University of Wisconsin Press, vol. 64(4), pages 347-355.
    19. Davidson, Carolyn & Steinberg, Daniel, 2013. "Evaluating the impact of third-party price reporting and other drivers on residential photovoltaic price estimates," Energy Policy, Elsevier, vol. 62(C), pages 752-761.
    20. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    21. Poterba, James M., 1996. "Retail Price Reactions to Changes in State and Local Sales Taxes," National Tax Journal, National Tax Association, vol. 49(2), pages 165-76, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gao, Xue, 2021. "The comparative impact of solar policies on entrepreneurship in the U.S. solar photovoltaic installation industry," Energy Policy, Elsevier, vol. 156(C).
    2. Li, Yanan & Lin, Jun & Qian, Yanjun & Li, Dehong, 2023. "Feed-in tariff policy for biomass power generation: Incorporating the feedstock acquisition process," European Journal of Operational Research, Elsevier, vol. 304(3), pages 1113-1132.
    3. Yamashiro, Ririka & Mori, Akihisa, 2023. "Combined third-party ownership and aggregation business model for the adoption of rooftop solar PV–battery systems: Implications from the case of Miyakojima Island, Japan," Energy Policy, Elsevier, vol. 173(C).
    4. Guerrero-Lemus, R. & Cañadillas-Ramallo, D. & Reindl, T. & Valle-Feijóo, J.M., 2019. "A simple big data methodology and analysis of the specific yield of all PV power plants in a power system over a long time period," Renewable and Sustainable Energy Reviews, Elsevier, vol. 107(C), pages 123-132.
    5. Daniele Curzi & Maria Garrone & Alessandro Olper, 2021. "Import Competition and Firm Markups in the Food Industry," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(4), pages 1433-1453, August.
    6. Dong, Changgui & Sigrin, Benjamin, 2019. "Using willingness to pay to forecast the adoption of solar photovoltaics: A “parameterization + calibration” approach," Energy Policy, Elsevier, vol. 129(C), pages 100-110.

    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. Miravete, Eugenio J. & Seim, Katja & Thurk, Jeff, 2023. "Pass-through and tax incidence in differentiated product markets," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    2. Dong, Changgui & Wiser, Ryan & Rai, Varun, 2018. "Incentive pass-through for residential solar systems in California," Energy Economics, Elsevier, vol. 72(C), pages 154-165.
    3. Sharat Ganapati & Joseph S. Shapiro & Reed Walker, 2016. "The Incidence of Carbon Taxes in U.S. Manufacturing: Lessons from Energy Cost Pass-through," Cowles Foundation Discussion Papers 2038R3, Cowles Foundation for Research in Economics, Yale University, revised Mar 2018.
    4. Sharat Ganapati & Joseph S. Shapiro & Reed Walker, 2020. "Energy Cost Pass-Through in US Manufacturing: Estimates and Implications for Carbon Taxes," American Economic Journal: Applied Economics, American Economic Association, vol. 12(2), pages 303-342, April.
    5. Sharat Ganapati & Joseph S. Shapiro & Reed Walker, 2016. "Energy Prices, Pass-Through, and Incidence in U.S. Manufacturing," Working Papers 16-27, Center for Economic Studies, U.S. Census Bureau.
    6. Dagoumas, Athanasios S. & Polemis, Michael L., 2020. "Carbon pass-through in the electricity sector: An econometric analysis," Energy Economics, Elsevier, vol. 86(C).
    7. Sébastien Houde & Wenjun Wang, 2022. "The Incidence of the U.S.-China Solar Trade War," CER-ETH Economics working paper series 22/372, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    8. Evert Reins, 2021. "Seductive subsidies? An analysis of second-degree moral hazard in the context of photovoltaic solar systems," IRENE Working Papers 21-03, IRENE Institute of Economic Research.
    9. Natalia Fabra & Mar Reguant, 2014. "Pass-Through of Emissions Costs in Electricity Markets," American Economic Review, American Economic Association, vol. 104(9), pages 2872-2899, September.
    10. Jacquelyn Pless & Arthur A. van Benthem, 2019. "Pass-Through as a Test for Market Power: An Application to Solar Subsidies," American Economic Journal: Applied Economics, American Economic Association, vol. 11(4), pages 367-401, October.
    11. O'Shaughnessy, Eric, 2022. "How policy has shaped the emerging solar photovoltaic installation industry," Energy Policy, Elsevier, vol. 163(C).
    12. Christos Genakos & Mario Pagliero, 2022. "Competition and Pass-Through: Evidence from Isolated Markets," American Economic Journal: Applied Economics, American Economic Association, vol. 14(4), pages 35-57, October.
    13. Rachel Griffith & Lars Nesheim & Martin O'Connell, 2018. "Income effects and the welfare consequences of tax in differentiated product oligopoly," Quantitative Economics, Econometric Society, vol. 9(1), pages 305-341, March.
    14. Dagoumas, Athanasios & Polemis, Michael, 2018. "Analysing Carbon Pass-Through Rate Mechanism in the Electricity Sector: Evidence from Greece," MPRA Paper 91067, University Library of Munich, Germany.
    15. Asatryan, Zareh & Gomtsyan, David, 2020. "The incidence of VAT evasion," ZEW Discussion Papers 20-027, ZEW - Leibniz Centre for European Economic Research.
    16. Antoniades, Alexis & Clerides, Sofronis & Xu, Mingzhi, 2023. "Multi-product firm price and variety response to firm-specific cost shocks," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    17. Sebastien Bradley & Naomi E. Feldman, 2020. "Hidden Baggage: Behavioral Responses to Changes in Airline Ticket Tax Disclosure," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 58-87, November.
    18. Kosonen, Tuomas, 2013. "More haircut after VAT cut? On the efficiency of service sector consumption taxes," Working Papers 49, VATT Institute for Economic Research.
    19. Kosonen, Tuomas, 2015. "More and cheaper haircuts after VAT cut? On the efficiency and incidence of service sector consumption taxes," Journal of Public Economics, Elsevier, vol. 131(C), pages 87-100.
    20. Daniele Curzi & Maria Garrone & Alessandro Olper, 2021. "Import Competition and Firm Markups in the Food Industry," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(4), pages 1433-1453, August.

    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:eee:enepol:v:121:y:2018:i:c:p:534-541. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    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.