Does the short-term boost of renewable energies guarantee their stable long-term growth? Assessment of the dynamics of feed-in tariff policy

Feed-in tariff (FiT) is one of the most efficient ways that many governments throughout the world use to stimulate investment in renewable energies (REs) technology. For governments, financial management of the policy could be challenging as it needs a considerable amount of budget to support RE producers during the long remuneration period. In this paper, it has been illuminated that the early growth of REs capacity could be a temporary boost. And the socio-economic structure of the system will backlash the policy if some social mechanisms are not considered. Social tolerance for paying REs tax and potential investors’ trust emanated from budget-related mechanisms -which have rarely been considered in the previous researches- are taken into consideration to reflect the roots of the policy resistance behavior. Iran was chosen as the case, which is in the infancy period of FiT implementation with the target of 5 gigawatt (GW) REs capacity until 2021. To illuminate such interrelated complexities, in an integrated framework, system dynamics (SD) methodology was used. Computer simulation shows that the likely financial crisis will not only lead to inefficient REs development after the target time (2021) but may also cause the existing plants to fail. Three alternative policies are tested in the model, and the results demonstrate that the most favorable policy is “adjusting the REs tax on electricity consumption based on budget status” which hits the target in 2021 and reach around 14 GW until 2035 without inducing any negative social externalities and financial crises. Policymakers can use this model to test other scenarios and improve the FiT policy design before the implementation phase.