Financial subsidy optimization to promote renewable energy development for sustainable development goal

Thi-Anh-Tuyet Nguyen, Shuo-Yan Chou, Thi-Hong-Diep Pham and Tiffany Hui-Kuang Yu

Energy & Environment, 2026, vol. 37, issue 5, 2502-2529

Abstract: Enhancing the efficacy of financial subsidies holds paramount significance in fostering sustainable development due to their influence on energy utilization, installation scalability, and the crucial pursuit of decarbonization. Despite a surge in scholarly interest surrounding financial subsidies for renewable energy, the literature studies fall short in comprehensively addressing the factors that impact on the accuracy and reliability of the model for identifying optimal financial subsidies. This paper introduces a robust approach to optimize financial subsidies to achieve the predefined target for renewable energy installation, considering the equilibrium between investor remuneration and government subsidy outlay. Center to this approach is the integration of a forward-looking price forecasting model and the establishment of an economic evaluation approach based on empirical data encompassing weather patterns, technical factors, investor expectations, subsidy disbursements, market risk assessments, and other pertinent parameters. The case study of Taiwan is conducted, and the results indicate that, in the baseline scenario, the financial subsidy is only effective in the risk-neutral market with a small solar system; in the mix scenario, the benefit of energy system increased at least 4.5%, however, the mix scenario is still ineffective to encourage the renewable energy development; and in the optimal scenario, by providing accurate recommendations for optimal financial subsidies, government can achieve the predefined target, even with reduced subsidies due to declining installation costs.

Keywords: Renewable energy; subsidy policy optimization; forecasting price model; economic evaluation approach; geometric Brownian motion approach; installation capacity target (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:sae:engenv:v:37:y:2026:i:5:p:2502-2529

DOI: 10.1177/0958305X241291726

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