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Feed-in tariffs combined with capital subsidies for promoting the adoption of residential photovoltaic systems

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  • Yamamoto, Yoshihiro

Abstract

Both feed-in tariffs (FITs) and capital subsidies have been widely employed to promote the adoption of renewable energy technologies. This study sheds light on the combined use of FITs and capital subsidies. The purpose of the study is to clarify their optimal combinations in order to encourage households to adopt photovoltaic (PV) systems. The study develops a microeconomic model embodying the idea of two-part tariffs. The most important findings concern the combination that maximizes social welfare: if FITs are applied to the total PV electricity generated, they should be set at the avoided cost per unit of PV electricity, and capital subsidies should be used to control the number of adopters; whereas, if FITs are applied to only surplus PV electricity, the previous principle is distorted. However, a numerical example suggests that the distortion has little effect on the maximized social welfare and, thus, it makes little difference whether FITs are applied to all PV electricity or just the surplus PV electricity. The findings may also be applied to the adoption of wind-power generation systems and to adoption by businesses.

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  • Yamamoto, Yoshihiro, 2017. "Feed-in tariffs combined with capital subsidies for promoting the adoption of residential photovoltaic systems," Energy Policy, Elsevier, vol. 111(C), pages 312-320.
    • Handle: RePEc:eee:enepol:v:111:y:2017:i:c:p:312-320
    DOI: 10.1016/j.enpol.2017.09.041
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    1. Ahmed S. Alahmed & Lang Tong, 2022. "Integrating Distributed Energy Resources: Optimal Prosumer Decisions and Impacts of Net Metering Tariffs," Papers 2204.06115, arXiv.org, revised May 2022.
    2. Solaymani, Saeed, 2019. "CO2 emissions patterns in 7 top carbon emitter economies: The case of transport sector," Energy, Elsevier, vol. 168(C), pages 989-1001.
    3. Li, Yanxue & Gao, Weijun & Ruan, Yingjun & Ushifusa, Yoshiaki, 2018. "The performance investigation of increasing share of photovoltaic generation in the public grid with pump hydro storage dispatch system, a case study in Japan," Energy, Elsevier, vol. 164(C), pages 811-821.
    4. Papież, Monika & Śmiech, Sławomir & Frodyma, Katarzyna, 2019. "Factors affecting the efficiency of wind power in the European Union countries," Energy Policy, Elsevier, vol. 132(C), pages 965-977.
    5. Li, Changsheng & Shen, Bo, 2019. "Accelerating renewable energy electrification and rural economic development with an innovative business model: A case study in China," Energy Policy, Elsevier, vol. 127(C), pages 280-286.
    6. Zhishuang Zhu & Hua Liao, 2019. "Do subsidies improve the financial performance of renewable energy companies? Evidence from China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 95(1), pages 241-256, January.
    7. Shuai Wang & Yao Li & Junjun Jia, 2022. "How to promote sustainable adoption of residential distributed photovoltaic generation in China? An employment of incentive and punitive policies," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 27(2), pages 1-26, February.
    8. Semmler, Willi & Di Bartolomeo, Giovanni & Minooei Fard, Behnaz & Braga, Joao Paulo, 2022. "Limit pricing and entry game of renewable energy firms into the energy sector," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 179-190.
    9. Hu, Bo & Zhou, P. & Zhang, L.P., 2022. "A digital business model for accelerating distributed renewable energy expansion in rural China," Applied Energy, Elsevier, vol. 316(C).
    10. Xu, Zhitao & Elomri, Adel & Al-Ansari, Tareq & Kerbache, Laoucine & El Mekkawy, Tarek, 2022. "Decisions on design and planning of solar-assisted hydroponic farms under various subsidy schemes," Renewable and Sustainable Energy Reviews, Elsevier, vol. 156(C).
    11. Candas, Soner & Siala, Kais & Hamacher, Thomas, 2019. "Sociodynamic modeling of small-scale PV adoption and insights on future expansion without feed-in tariffs," Energy Policy, Elsevier, vol. 125(C), pages 521-536.
    12. Heleno, Miguel & Sehloff, David & Coelho, Antonio & Valenzuela, Alan, 2020. "Probabilistic impact of electricity tariffs on distribution grids considering adoption of solar and storage technologies," Applied Energy, Elsevier, vol. 279(C).

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