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Policy Uncertainty, Market, Political Polarization, and Utility-scale Solar in the United States

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  • Zaman, Azaz
  • Miao, Ruiqing
  • Khanna, Madhu

Abstract

We examine the effects of economic policy uncertainty (EPU), market deregulation, and political polarization on the utility-scale solar electricity generation in the United States. Using state-level data from 2000 to 2023 and a negative binomial fixed effects model, we find a significant negative relationship between EPU and annual solar electricity generation. On average, a one-unit increase in the EPU index is associated with a 716.51 megawatt-hours (0.14%) decline in expected solar electricity generation annually, likely due to investor risk aversion. While existing studies are on the national level, this study is the first one documenting the impact of EPU at the state-level. Conversely, states with a 1% higher percentage of voters for the Democratic Senate nominees is associated with a 29,990.92 megawatt-hours (5.86%) higher solar electricity generation annually, reflecting the party's strong support for renewable energy. Finally, deregulated electricity markets are linked to a 211,778.91 megawatt-hours (41.38%) increase in annual solar electricity generation compared to regulated markets. Based on these findings, we suggest that policymakers should prioritize reducing policy uncertainty, foster bipartisan support, and encourage market deregulation to boost investments in utility-scale solar electricity generation.

Suggested Citation

  • Zaman, Azaz & Miao, Ruiqing & Khanna, Madhu, 2025. "Policy Uncertainty, Market, Political Polarization, and Utility-scale Solar in the United States," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361210, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:361210
    DOI: 10.22004/ag.econ.361210
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    References listed on IDEAS

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    1. Victor Ajayi & Tom Weyman-Jones, 2021. "State-Level Electricity Generation Efficiency: Do Restructuring and Regulatory Institutions Matter in the US?," Working Papers EPRG2123, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Deschenes, Olivier & Malloy, Christopher & McDonald, Gavin, 2023. "Causal effects of Renewable Portfolio Standards on renewable investments and generation: The role of heterogeneity and dynamics," Resource and Energy Economics, Elsevier, vol. 75(C).
    3. Ajayi, V. & Weyman-Jones, T., 2021. "State-Level Electricity Generation Efficiency: Do Restructuring and Regulatory Institutions Matter in the US?," Cambridge Working Papers in Economics 2166, Faculty of Economics, University of Cambridge.
    4. Ajayi, Victor & Weyman-Jones, Tom, 2021. "State-level electricity generation efficiency: Do restructuring and regulatory institutions matter in the US?," Energy Economics, Elsevier, vol. 104(C).
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