Bridging the Solar Divide: Demand Responses to Subsidies among Low-Income Households

• In Event: Solar Policy — Investment, Diffusion, and Local Governance

Abstract

Governments increasingly rely on subsidies to encourage household adoption of clean energy technology, yet credible estimates of demand elasticities, especially for low-income households, remain limited. In this paper, we study the price effects and demand responses to solar subsidies in California using a regression discontinuity design. The program we study offered subsidies to low-income households in disadvantaged census tracts. Census tracts are designated as disadvantaged if they lie above the 75\textsuperscript{th} percentile of a socioeconomic and environmental score, so assignment to disadvantaged-community status is plausibly as good as random near the cutoff. Using the full sample of census block groups, we document a 347\% increase in total rebates and a 29.6\% increase in solar installations. Among block groups with positive solar adoption, we find a 314\% increase in total rebates, a 22.1\% increase in installations, and a 12.7\% reduction in the out-of-pocket price paid by households. These estimates are robust to alternative bandwidths and weighting methods. We then use the estimates to calculate elasticities and find an effective-price elasticity of -1.73, which falls within the range of previous estimates in the literature. By contrast, rebate elasticities are much smaller, ranging from 0.070 to 0.085, implying that installations did not increase in proportion to the large increase in subsidies.

Authors

• Kavya Ravindranath, George Washington University
  Non-Presenting Co-Author

• Rui Zhong, Texas A&M University
  Presenting Author