The Effects of Capital and Energy Subsidies on the Optimal Design of Microgrid Systems

Pablo Benalcazar, Adam Suski and Jacek Kamiński
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Pablo Benalcazar: Division of Energy Economics, Department of Policy and Strategic Research, Mineral and Energy Economy Research Institute of the Polish Academy of Sciences, 31-261 Krakow, Poland
Adam Suski: Department of Management Engineering, Technical University of Denmark, 2800 Kongens Lyngby, Denmark
Jacek Kamiński: Division of Energy Economics, Department of Policy and Strategic Research, Mineral and Energy Economy Research Institute of the Polish Academy of Sciences, 31-261 Krakow, Poland

Energies, 2020, vol. 13, issue 4, 1-23

Abstract: Microgrids constitute an attractive solution for the electrification of areas where grid extension is not technically feasible or prohibitively expensive. In recent years, national governments have implemented various support policies to encourage the deployment of renewable energy systems (RES) and microgrid hybrid-powered systems. A fundamental aspect during the design and disposition of these types of units is the determination of the optimal configuration and sizing of each power generation component. Furthermore, the optimal design of microgrids is strongly dependent on technological parameters, local meteorological conditions, among other factors. In this context, this paper investigates the effects of different policy measures on the optimal configuration of microgrids functioning in islanded mode. A computable model is employed to carry out a set of sensitivity analyses and assess the impact of capital and fuel subsidies on the levelized cost of electricity of various systems. The model employed for this study minimizes the total life cycle costs (TLCC) over the 20-year lifetime of the microgrid project. Besides, as meteorological conditions are crucial parameters to consider while designing microgrids, a sensitivity analysis is conducted to examine the effect of wind speed and solar irradiation on the capacities of each distributed generation units. Our results indicate that capital subsidies, as well as fuel price variations, have a substantial effect on the final design of microgrid systems for rural electrification.

Keywords: microgrids; subsidies; optimization; financial incentives; policy instruments (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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