Abstract
Solar photovoltaic (PV) system prices in the United States display considerable heterogeneity both across geographic locations and within a given location. Such heterogeneity may arise due to state and federal policies, differences in market structure, and other factors that influence demand and costs. This paper examines the relative importance of such factors on equilibrium solar PV system prices in the United States using a detailed dataset of roughly 100,000 recent residential and small commercial installations. As expected, we find that PV system prices differ based on characteristics of the systems. More interestingly, we find evidence suggesting that search costs and imperfect competition affect solar PV pricing. Installer density substantially lowers prices, while regions with relatively generous financial incentives for solar PV are associated with higher prices.
Highlights
Installations of solar photovoltaic (PV) systems have expanded rapidly over the past decade, with continued growth anticipated over the near- and longer-term (Baker et al 2013, IPCC 2014)
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This paper examines the variability in equilibrium prices of solar PV systems in the United States using a large dataset of installations in fourteen states between 2010 and 2012
Summary
Installations of solar photovoltaic (PV) systems have expanded rapidly over the past decade, with continued growth anticipated over the near- and longer-term (Baker et al 2013, IPCC 2014). Since solar PV modules are a globally traded commodity, the most likely explanations for this difference in price are differences in policy, characteristics of the local installer base, and market structure By exploring how these factors influence equilibrium prices in the United States, we shed light on sources of price variability that may be amenable to policy interventions aimed at facilitating cost reductions. We create a “consumer value of solar” variable to broadly capture how the financial attractiveness of PV systems might influence pricing This variable is calculated as the sum of the discounted value of all incentives–including direct rebates, performance-based incentives, solar renewable energy credit (SREC) payments, and state and federal tax credits, as applicable– and electricity bill savings over the expected life of the PV system (using a 7% discount rate, 20 year system lifespan, and electricity rates increasing with inflation).
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