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We adopt a real options approach to quantify transfers to households that are sufficient to induce adoption of solar panels. These transfers are then combined with the panels’ production capacity to obtain a measure of cost-effectiveness of alternative policies that are either in effect, or currently being considered by State governments. Alternative policies are then ranked based on their cost-effectiveness. Generally we find that a combination of net metering and peak-pricing is more cost-effective than the federal tax credit and the solar loan interest tax deduction.


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