Learning-by-Doing in Solar Photovoltaic Installations∗

The solar photovoltaic (PV) industry in the United States has been the recipient of billions of dollars of subsidies at the federal and state level, often motivated by environmental externalities and dynamic spillovers from learning-by-doing in the installation of the technology. This paper investigates cost reductions due to learning-bydoing (LBD) using comprehensive data on all solar PV installations in California from 2002 to 2012. We develop a model of installer firm pricing behavior that allows for economies of scale, market power, and dynamic pricing to quantify both appropriable and non-appropriable LBD. We find strong evidence for both, suggesting a role for solar PV subsidies to improve economic efficiency by addressing a non-appropriable LBD positive externality. However, our results suggest that the California Solar Initiative cannot be justified by non-appropriable LBD alone.