The Effects of Market Concentration on Residential Solar PV Prices: Competition, Installer Scale, and Soft Costs

Competition among residential solar photovoltaic (PV) installers may reduce PV price markups and yield lower prices. At the same time, competition may reduce installer experience and opportunities for cost reductions through learning-by-doing and economies of scale. These dynamics suggest that PV non-hardware or 'soft' costs and installed prices depend on the distribution of market shares among installers, also known as market structure. This study leverages a rich data set of 226,769 residential PV systems to examine the relationship between market structure, soft costs, and PV prices. The results show that PV prices are lower, on average, in more concentrated markets, i.e., markets with fewer installers or where a subset of installers holds a large market share. The study provides evidence that this relationship is non-linear, such that prices are minimized in markets with an optimal balance of the benefits of market concentration and the benefits of competition.