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Cost, Contractors and Scale: An Empirical Analysis of the California Solar Market

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This paper presents an empirical analysis of the rapidly growing California rooftop solar photovoltaic market using detailed data of over 100,000 solar installations between 2007 and 2014. The rapid fall in the cost of solar panels stand central in the expansion of this market. I use a semi-parametric regression model to aid identification of cost factors by decomposing time-varying and cross-sectional components. I find that the use of Chinese manufactured panels are associated with costs that are 6% lower. Economies of scale at the local level (number of yearly installations in a zip code) and at the installation level (size of the installation) are also associated with lower costs. Higher subsidies, and higher contractor market-share are associated with higher costs. I use an exploratory analysis of the dominant contractor, SolarCity, to discuss non-cost factors in the expansion of the solar photovoltaic market.

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Energy Specializations: Renewables – Solar ; Renewables – Policy and Regulation

JEL Codes: G32: Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill, Q42: Alternative Energy Sources, D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity, Q41: Energy: Demand and Supply; Prices, D22: Firm Behavior: Empirical Analysis

Keywords: Solar power, Solar contractors, Energy investment, Energy subsidies, Economies of scale, Partial linear model

DOI: 10.5547/01956574.38.6.jmau

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Published in Volume 38, Number 6 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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