Price stabilization & solar plant adoption: evidence from renewable energy transition in Chile
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Date
2025
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Abstract
Price stabilization policies have been a key driver of solar power plant adoption amid the ongoing renewable energy transition. This paper studies a policy introduced in Chile that allows generation units with an installed capacity below 9 MWs to opt for selling their electricity at the spot market price or a stabilized price. First, I document that the policy has shaped the size of entrants: there is a remarkable bunching of solar plants around the threshold. Second, I estimate a nested-logit model of solar plant adoption. Counterfactual analysis suggests that, in the absence of the price stabilization policy, 47.5% of the solar capacity would not have been installed at all. Finally, I examine the environmental implications of the policy in terms of thermal generation abatement and estimate an implicit price of 206 USD/ton CO2, above prices observed in cape-and-trade systems nowadays. A geographically targeted design would improve its environmental efficiency at a lower cost.
Description
Tesis (Magíster en Economía)--Pontificia Universidad Católica de Chile, 2025
Keywords
Solar PV, Electricity markets, Renewable energy, Price stabilization