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The Surprising Pass-Through of Solar Subsidies

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  • Pless, Jacquelyn
  • Van Benthem, Arthur

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.

Suggested Citation

  • Pless, Jacquelyn & Van Benthem, Arthur, 2017. "The Surprising Pass-Through of Solar Subsidies," CEPR Discussion Papers 11908, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11908
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    References listed on IDEAS

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    4. Arthur van Benthem & Kenneth Gillingham & James Sweeney, 2008. "Learning-by-Doing and the Optimal Solar Policy in California," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 131-152.
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    1. repec:eee:enepol:v:121:y:2018:i:c:p:534-541 is not listed on IDEAS
    2. repec:eee:enepol:v:121:y:2018:i:c:p:325-335 is not listed on IDEAS
    3. Buchheim, Lukas & Watzinger, Martin & Wilhelm, Matthias, 2019. "Job Creation in Tight and Slack Labor Markets," Rationality and Competition Discussion Paper Series 144, CRC TRR 190 Rationality and Competition.
    4. Bruno Lanz & Evert Reins, 2019. "Asymmetric information on the market for energy efficiency: Insights from the credence goods literature," IRENE Working Papers 19-03, IRENE Institute of Economic Research.

    More about this item

    Keywords

    buy vs. lease; demand curvature; market power; over-shifting; Pass-Through; solar subsidy; third-party ownership;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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