Incentive Pass-Through in the California Solar Initiative - An Analysis Based on Third-Party Contracts

Many utilities and states have implemented incentives for residential solar to reduce the high upfront cost. There is a growing body of literature evaluating the extent of this corresponding price reduction, termed 'incentive pass-through', typically finding nearly complete path-through for host-owned systems. However, few studies hitherto had the data to reliably estimate path-through for third-party owned systems, which comprise most of new installations over this period. This study evaluates incentive pass-through for third-party owned systems in California between 2010 and 2014. The estimation results show path-through rate is around 62%, suggesting that unlike host-owned systems, a portion of the incentive reduced the contract price of the system and the rest of the incentive was retained by the installer. This study has important implications for future subsidy program design in the presence of different ownership types in the market.