EconPapers    
Economics at your fingertips  
 

Optimal design of subsidy to stimulate renewable energy investments: The case of China

M.M. Zhang, D.Q. Zhou, P. Zhou and H.T. Chen
Authors registered in the RePEc Author Service: Peng Zhou ()

Renewable and Sustainable Energy Reviews, 2017, vol. 71, issue C, 873-883

Abstract: This paper proposes a real options model for estimating the optimal subsidy for renewable energy power generation project by using stochastic process to describe the market price of electricity, CO2 price and investment cost. Two indicators, i.e., project value and threshold value, are used to derive the optimal subsidy. The least squares Monte Carlo simulation method is used to solve the model. The proposed model is used to empirically evaluate the optimal level of subsidy for solar photovoltaic power generation in China. The results show that carbon emission trading scheme helps reduce subsidy. Unit generating capacity, market price of electricity, CO2 price and the volatility of investment cost are negatively related with subsidy, whereas investment cost and the volatility of electricity price and CO2 price are positively related with subsidy. It is suggested that Chinese governments take some measures, e.g., promoting technological progress, establishing a nationwide carbon emission trading market, promoting the competition in renewable energy industry as well as maintaining the stability of CO2 price and electricity price, to reduce the required subsidy.

Keywords: Renewable energy investment; Uncertainty; Carbon emission trading scheme; Subsidy; Real options (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1364032116311728
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:rensus:v:71:y:2017:i:c:p:873-883

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/600126/bibliographic
http://www.elsevier. ... 600126/bibliographic

DOI: 10.1016/j.rser.2016.12.115

Access Statistics for this article

Renewable and Sustainable Energy Reviews is currently edited by L. Kazmerski

More articles in Renewable and Sustainable Energy Reviews from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2020-02-19
Handle: RePEc:eee:rensus:v:71:y:2017:i:c:p:873-883