Using a system dynamics model to assess the effects of capital subsidies and feed-in tariffs on solar PV installations

To achieve national CO2 emission reduction targets, the Taiwanese government is planning to adopt policies, such as feed-in tariffs (FITs) and capital subsidies, in order to attract the public as well as companies to invest in and use solar photovoltaic (PV) systems. However, a huge budget is necessary for the government to implement such policies. Therefore, it is important that it fully recognizes which policy, or combination of policies, promoting solar PV applications has the greatest economic benefit. This study uses the system dynamics approach to develop a simulation for assessing these promotion policies. Using this simulation system, policymakers can carry out cost/benefit analyses for different combinations of promotion policies, CO2 emission reduction goals, and budget limitations. In addition, the simulation scenarios include different FIT prices, subsidies, and upper limits of annual ROI (return of investment). The simulation period is from 2011 to 2030. We find that when adopting only FITs or capital subsidies with a fixed upper limit of ROI, increasing the FIT price or subsidy is a good approach. When the upper limit of ROI is fixed, the effect of different combinations of FIT prices and subsidies on the accumulation of solar PV applications is insignificant. Nevertheless, the promotion policy with the higher subsidy and lower initial FIT price has a lower average cost of CO2 emission reduction.