Subsidy strategy for distributed photovoltaics: A combined view of cost change and economic development

• Published in: Energy economics 2021-05, Vol.97, p.105087, Article 105087
• Main Authors: Tang, Songlin, Zhou, Wenbing, Li, Xinjin, Chen, Yingchao, Zhang, Qian, Zhang, Xiliang
• Format: Article
• Language: English
• Subjects: China; Costs; Distributed photovoltaic; Economic development; Economics; Electricity; Empirical analysis; Energy economics; Evolutionary game; Game theory; Government subsidy; Innovations; Installation; Installation costs; Local economic development; Local economy; Photovoltaic cells; Photovoltaics; Prices; Public concern; Public interest; Regional development; Regional economic development; Simulation; Simulation analysis; Strategy; Subsidies; Technological change
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2020.105087

Diminishing government subsidies for distributed photovoltaic (DPV) systems have aroused wide public concern. This paper intends to explore the influence mechanism of economic development and DPV subsidy strategy and provide a reference for promoting DPV development. Evolutionary game theory and empirical analysis are used to analyze the interactions between government and users in the process of DPV installation in China. The results from simulation analysis and empirical analysis show that the effect of DPV subsides is restricted by regional economic development. Based on local economic development, the government can choose high subsidy strategy or low subsidy strategy to guide the DPV development in a reasonable way. Additionally, the decreasing cost can effectively boost the demand for DPV investment with less subsidies, which accounts for why the government has reduced DPV subsidies. However, subsidy strategy will remain an important tool that coordinates local economies with DPV construction until the electricity generated by DPV systems can achieve grid connection at a comparable price. Moreover, technological innovation should be encouraged to reduce installation cost so that DPV systems can be accessed at affordable prices as soon as possible. •Interaction between participants in DPV installation is analyzed by evolutionary game theory and empirical analysis.•The effect of DPV subsides is restricted by regional economic development level.•The decreasing cost can account for diminishing national DPV subsidy, so technological innovation should be encouraged.•Subsidy will remain an important tool for DPV construction until it can achieve connection to grid at a comparable price.