To What Degree do Retail Electricity Prices Inform Residential Solar Energy Investment Decisions?

The relationship between electricity price and household solar photovoltaic (PV) adoption has not been thoroughly studied. How much would a carbon tax, and increase in electricity price, spur growth in residential solar? This paper adds to the literature with a utility-level panel analysis. Consumer choice theory provides the framework for the empirical models. I use electricity price and net metered solar PV capacity data from the Energy Information Administration (EIA). Through a variety of specifications, I control for both utility and state-year effects. My findings suggest that electricity price is significantly positively correlated with solar adoption, with an estimated price elasticity of 1.85. These results are limited by endogeneity and omitted variable bias