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Sun and Lemons: Getting over Information Asymmetries in the California Solar Market

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Abstract

Using detailed data of approximately 125,000 solar photovoltaic systems installed in California between 2007 and 2014 I argue that the adoption of solar panels from Chinese manufacturers and the introduction of a leasing model for solar systems are closely intertwined. First, cheaper Chinese panels allowed a leasing model to be profitable for contractors. But an asymmetric information problem exists in the market for solar panels. Solar panels are long-lived productive assets, where quality is important but costly for individual consumers to verify. Consumers can instead be expected to rely on brands and observed reliability. This led to a barrier to entry for cheaper panels from new, primarily Chinese manufacturers. The adoption of a leasing model by several large local installers solved the asymmetric information problem and led to the adoption of Chinese panels and in turn lower overall system prices.

Suggested Citation

  • Mauritzen, Johannes, 2014. "Sun and Lemons: Getting over Information Asymmetries in the California Solar Market," Discussion Papers 2014/35, Norwegian School of Economics, Department of Business and Management Science.
  • Handle: RePEc:hhs:nhhfms:2014_035
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    File URL: http://hdl.handle.net/11250/223719
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    Keywords

    Solar panels; asymmetric information problem;

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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