Abstract
Emerging renewable energy markets may become more concentrated over time as the most efficient firms accumulate market share. The effects of this market concentration on prices are tested using a rich dataset of residential solar photovoltaic (PV) systems in the United States. A novel hypothesis is explored that the effects of market concentration may be non-monotonic. Prices may decline in market concentration due to efficiency gains associated with returns to scale but increase in concentration in already concentrated markets due to increasing market power. The results of an econometric model provide evidence to support the non-monotonic hypothesis. However, the data suggest that the relationship between prices and firm scale is nuanced, and that both large- and small-scale PV installers may wield efficiency advantages.
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