Deconstructing Solar Photovoltaic Pricing: The Role of Market Structure, Technology, and Policy

Gillingham, Kenneth; Deng, Hao; Wiser, Ryan; Darghouth, Naïm; Nemet, Gregory F.; Barbose, Galen; Rai, Varun; Dong, Changgui

doi:10.5547/01956574.37.3.kgil

Cited by 51 publications

(9 citation statements)

References 41 publications

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“…3 Figure A1 in Appendix A presents the size distribution of PV systems in the range between zero and 30 kW in the upper panel, between four and six kW in the lower left panel and between nine and eleven kW in the lower right panel. There are not disproportionately many systems sized just below five or ten kW, affirming that the system size is determined by the consumer's needs rather than strategic considerations (see also Gillingham et al, 2016a;Pless and van Benthem, 2019, for similar conclusions on the sizing of PV systems).…”

Section: Program Descriptionmentioning

confidence: 90%

“…This association is however not statistically significant when dropping observations in the vicinity of a rebate level drop date (Table C3, Appendix C). A larger transaction price per Watt could again be attributed to less standardized installations in residential consumers, such as carport structures (see Gillingham et al, 2016a, for a similar reasoning).…”

Section: Subsidy Levels and Transaction Prices Per Watt Of Pv Systemsmentioning

confidence: 96%

“…First, Pless and van Benthem (2019) find evidence suggesting that the market for solar photovoltaic systems in California is affected by imperfect competition, in particular heterogeneous degrees of market power across firms. To control for the development of market power of a firm over time, I follow Dong et al (2018) and compute the rank of the respective installer in terms of total installations within the zip code at month t. To further account for local industry concentration and competition, I follow Gillingham et al (2016a) and compute the year-zip code level Herfindahl-Hirschmann Index (HHI) using the number of installations of a respective installer in the zipcode to calculate his market share in the respective year. Second, Bollinger and Gillingham (2019) show that the installation costs of solar photovoltaic systems in California decrease in the experience of installers, which is attributed to learning-by-doing.…”

Section: Identification Strategymentioning

confidence: 99%

“…One key challenge to cost-effectiveness is that some characteristics of PV systems are subject to informational asymmetries typical for credence goods. In particular, installing PV systems consists of a complex arrangement of different technological components and working steps (Giraudet et al, 2018;Gillingham et al, 2016a) which many consumers deliberately leave to professional installers. Moreover, consumers face difficulties in verifying whether a system is installed and priced appropriately because the definition of a counter-factual relative to which the electricity output and price is measured is difficult (Giraudet, 2020;Lanz and Reins, 2021).…”

Section: Introductionmentioning

confidence: 99%

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Theory and evidence on the credence component of energy-efficient technologies

Reins¹

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The credence component of energy-efficient technologies is an important barrier to their adoption. In the context of many investments in energy-efficient technologies, the demand-side of the market has limited information about which technology or services are optimal and therefore has to trust the supply-side. In this setting, the supply side may exploit their information advantage, leading to supply-side inefficiencies characteristic for credence goods, such as providing insufficient/extensive services as well as overcharging for these services. In the first chapter of this thesis, I develop a simple theoretical framework highlighting inefficiencies resulting from the associated incentive structure. Discussing linkages between the empirical literature on credence goods and that on the market for energy efficiency, I identify implications for the design of policies promoting the adoption of energy-efficient technologies. In the second chapter, I use data on subsidized solar photovoltaic (PV) systems to study second-degree moral hazard (i.e. the impulse of installers to increase supply-side inefficiencies when consumers receive subsidies). Using an instrumental variable strategy, I quantify the impact of subsidy levels on the self-reported expected electricity output (design factor) influencing the total subsidies received and transaction prices of PV systems. The results show a significant and positive association between larger subsidy levels and the design factor as well as transaction prices. In the third chapter, I analyze how reciprocity affects supply-side inefficiencies. Employing a standard experimental framework for lab-experiments on credence goods, I study how gift exchange changes the behavior of consumers and expert sellers. Results suggest that small and unconditional gifts may improve market outcomes, in particular when consumers need an expensive service.

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Section: Program Descriptionmentioning

confidence: 90%

Section: Subsidy Levels and Transaction Prices Per Watt Of Pv Systemsmentioning

confidence: 96%

Section: Identification Strategymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Theory and evidence on the credence component of energy-efficient technologies

Reins¹

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“…Kwan (2012) also models residential PV adoption, however he measures the effects of an average level of state incentives. There is some recent evidence that increased solar incentive policy is associated with price increases (Gillingham et al, 2016).…”

Section: Introductionmentioning

confidence: 99%

Three Essays on Energy Economics

Wiggins¹

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This dissertation focuses on the economics of electricity generation. I aim to answer three main questions: After controlling for outside market forces, how did acid rain regulation impact Eastern coal production? How have the fundamental relationships in the natural gas market changed since deregulation, especially given the rise of production from shale resources? And how have sub-state policies affected the adoption of residential solar generation installations? For each question, I use economic tools to provide empirical answers which will contribute both to the academic literature as well as energy policy. My first essay looks at the coal production in the Eastern US from 1983-2012. It is widely understood that the quantity of coal produced in this region declined during this time period, though its causes are debated. While some have identified the cause to be outside economic forces, the prevailing view is that federal regulation was the main driver. By controlling for outside market forces, this paper is able to estimate the effect that the differing regulatory periods have had on coal production. Results demonstrate how in general the regulatory phases of the Acid Rain Program are associated with decreases in production in the Illinois and Appalachian basins, however with varying magnitudes. Further, there are some areas that saw some increases. The essay also measure the mitigating impact that the installation of 'scrubber' units had on production. Overall, this essay provides a more nuanced look at the relationship between coal production and regulation during this time period. You learn a lot getting a PhD. I mean, that's kind of the point. But along with all the math and theory, you're given ample time to learn about the life choice you're making. And now on my way out, I can tell you with a high degree of certainty: it's a bad one. It's not that the costs outweigh the benefits, though they are formidable: low pay, geographic and social isolation, being sent to the back of the prestige line. These of course were all known prior and definitely realized during. But while most say the long-term benefits will eventually pay off, it's important to consider that they're all conditional on passing. This is not the slightest bit guaranteed, much less in any reasonable time-frame. Pursing a doctorate is a bad choice because of how unbelievably lucky you need to be to actually finish. See, the thing is, your ideas are probably terrible. Solidarity: mine are too. We all tend to enjoy our own because we don't really like to consider whether we're wrong. The academic market for bad ideas is highly saturated, and to create anything different, you need a lot of help. Throughout my doctorate, I was extremely fortunate to have a small group of people who were willing and able to provide direction, clarification, and assistance. Without them, I would have been lost.

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Trends in the market structure of US residential solar PV installation, 2000 to 2016: An evolving industry

O’Shaughnessy

2018

Progress in Photovoltaics

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The US residential solar photovoltaic (PV) installation grew from fewer than 100 firms in 2000 to about 3000 firms by 2016. The rapid expansion of this emerging industry prompts questions about the installation industry's market structure, such as how market shares are distributed among installers and how interinstaller competition affects PV deployment. This article leverages a rich dataset to describe trends in the evolution of the US residential PV installation industry. The data show that most residential PV installers are relatively small companies, with about half of installers installing fewer than 5 systems. At the same time, a subset of high‐volume installers have accumulated market share, especially from 2010 to 2016. Causes of this recent market concentration are explored, with an emphasis on the role of the emergence of alternative customer financing options in the United States.

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Deconstructing Solar Photovoltaic Pricing: The Role of Market Structure, Technology, and Policy

Cited by 51 publications

References 41 publications

Theory and evidence on the credence component of energy-efficient technologies

Theory and evidence on the credence component of energy-efficient technologies

Three Essays on Energy Economics

Trends in the market structure of US residential solar PV installation, 2000 to 2016: An evolving industry

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