Discussion Paper Details

Please find the details for DP11908 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: The Surprising Pass-Through of Solar Subsidies

Author(s): Jacquelyn Pless and Arthur Van Benthem

Publication Date: March 2017

Keyword(s): buy vs. lease, demand curvature, market power, over-shifting, Pass-Through, solar subsidy and third-party ownership

Programme Area(s): Public Economics

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.

For full details and related downloads, please visit:

Bibliographic Reference

Pless, J and Van Benthem, A. 2017. 'The Surprising Pass-Through of Solar Subsidies'. London, Centre for Economic Policy Research.