NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Surprising Pass-Through of Solar Subsidies

Jacquelyn Pless, Arthur A. van Benthem

NBER Working Paper No. 23260
Issued in March 2017
NBER Program(s):EEE, PE

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.

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Document Object Identifier (DOI): 10.3386/w23260

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