We study the optimal design of spatially differentiated subsidies for residential solar panels. We build a structural model of solar panel demand and electricity production across the United States and estimate the model by combining (1) remotely sensed data on residential solar panels, (2) power-plant-level data on hourly production and emissions, and (3) a state-of-the-art air pollution model. The current subsidies lead to severe spatial misallocation. National funding for subsidies under the current system exceeds the unconstrained optimum by over 70%. Our results suggest that there could be large welfare gains to redistributing funds toward other programs.