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Deconstructing Solar Photovoltaic Pricing

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.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Energy and the Economy – Other; Renewables – Policy and Regulation; Electricity – Generation Technologies; Nuclear Power – Policy and Regulation; Renewables – Solar

JEL Codes:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
Q49 - Energy: Other
Q52 - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
Q2 -
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
Q51 - Valuation of Environmental Effects

Keywords: residential photovoltaic, solar, price dispersion

DOI: 10.5547/01956574.37.3.kgil

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Published in Volume 37, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.