Job Market Paper:
Demand and Supply for Rooftop Solar Panels: Evidence from California Solar Initiatives
Solar energy has become the most important renewable energy source in California --- around one third of the state's solar capacity comes from rooftop solar panels. My work estimates the demand and supply functions of rooftop solar panels in California using a rebate program called California Solar Initiatives (CSI). Accurately estimating demand and supply is crucial for evaluating previous incentive programs and guiding future ones. I estimate the demand elasticity in California to be -3.824 and the supply elasticity to be 5.572. These estimates further imply that for each dollar of rebate rate increase, sellers receive $0.29 and households get $0.71. CSI contributed to 46% of new adoptions and a 29% increase in solar generation capacity between 2007 and 2014. It generated a $525 million increase in consumer surplus and producer surplus. However, $663 million spent did not go to either households or sellers. Of the surplus generated, more than 40% went to the top 25% wealthiest Zipcodes. My estimation also shows that as prices of solar panels decrease, households and sellers get more inelastic. This implies that rebates are no longer an efficient way to achieve higher adoption of solar panels in the future, as prices will likely continue to decrease. My contribution to the literature is a new method of using rebates as a source of exogeneous change to estimate both demand and supply functions simultaneously. I analyze disaggregated data at the Zipcode-month level and I use a two-part model to incorporate large amounts of Zipcode-months with no solar panel installations