Maximizing solar PV dissemination under differential subsidy policy across regions

Abstract

This study investigates the effect of a renewable energy dissemination policy on investment decisions regarding solar photovoltaic (PV) installation. We present a theoretical model and conduct a simulation analysis to estimate the total capacity of solar PV generators according to a given subsidy policy. We show how the capacity maximizing subsidy policy depends on the total amount of subsidy budget, interest rate, the expected amount of solar resource and land price in each region. We particularly focus on the improvements of solar PV capacities under the same subsidy budget when the subsidy policy is changed from uniform (equal for all regions) to differential (varying over regional characteristics). This improvement is shown through a case study using Korean data.