Economic feasibility of the investment in residential photovoltaics system considering the effects of subsidy policies: A Korean case

Jingu Jang, Moonkyu Seo, Giwon Nam and Deok-Joo Lee

The Engineering Economist, 2021, vol. 66, issue 3, 206-224

Abstract: The economic feasibility of the investment is critical for residential users’ decision making in investing in photovoltaic (PV) systems because the high costs of installing PV technology may be burdensome. Therefore, governments in many countries have been implementing policies to reduce the economic burden of household users' PV investments and thus promote solar energy to household users. The purpose of this paper is to perform an economic feasibility analysis of investments in residential PV systems that considers the effects of several subsidy plan alternatives using the empirical data of Korea. The result shows that the residential PV investment project would be economically viable without subsidy; however, a payback period exceeds 8 years, which could be perceived by residential customers as too long to be attractive enough to invest in a PV system at present. In addition, we found that the net present value is highest under the production based subsidy scheme, whereas the payback period is shortest with a lump-sum subsidy.

Date: 2021
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DOI: 10.1080/0013791X.2020.1831119

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