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This paper estimates demand for residential solar photovoltaic (PV) systems using a new approach to address three empirical challenges that often arise with count data: excess zeros, unobserved heterogeneity, and endogeneity of price. Our results imply a price elasticity of demand for solar PV systems of −0 65. Counterfactual policy simulations indicate that reducing state financial incentives in half would have led to 9% fewer new installations in Connecticut in 2014. Calculations suggest a subsidy program cost of $364/tCO 2 assuming solar displaces natural gas. Our Poisson hurdle approach holds promise for modeling the demand for many new technologies.

This paper estimates demand for residential solar photovoltaic (PV) systems using a new approach to address three empirical challenges that often arise with count data: excess zeros, unobserved heterogeneity, and endogeneity of price. Our results imply a price elasticity of demand for solar PV systems of −0 65. Counterfactual policy simulations indicate that reducing state financial incentives in half would have led to 9% fewer new installations in Connecticut in 2014. Calculations suggest a subsidy program cost of $364/tCO 2 assuming solar displaces natural gas. Our Poisson hurdle approach holds promise for modeling the demand for many new technologies. numerous seminar audiences for helpful discussions. Finally, we acknowledge funding from US Department of Energy award This calculation is made based on an average system price in 2008-2014 in CT of $36,607, average state rebate amount of $10,288, and tax credit (taken post-incentive) of $7896 for consumers with at least this much tax burden (all in 2014 dollars).

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