The effect of current and prospective policies on photovoltaic system economics: An application to the US Midwest |
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| Affiliation: | 1. Starzl Unit of Abdominal Transplantation, University Hospitals Saint Luc, Université catholique Louvain, Brussels, Belgium;2. Hepato-biliary Surgery and Liver Transplantation Unit, Sapienza University of Rome, Umberto I Hospital, Rome, Italy;3. Department of Bio-technological and Applied Clinical Sciences, University of L''Aquila, L''Aquila, Italy;4. Department of Internal Medicine I, Innsbruck Medical University, Innsbruck, Austria;5. Department of Transplantation and Hepatobiliary Surgery, University of Mainz, Mainz, Germany |
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| Abstract: | This study models fundamental features of current and prospective policies encouraging adoption of residential photovoltaic (PV) systems. A key finding is that time-of-day (ToD) pricing can enhance or worsen the economics of PV systems. Moreover, increased responsiveness of electricity demand to its price diminishes the effectiveness of ToD pricing in the absence of net metering, but does not affect it otherwise. An application to plausible conditions in the State of Indiana, USA, shows that current policies are unlikely to trigger adoption by a risk-neutral forward-looking residential customer. However, adoption of PV systems can be induced if the Federal Tax Credit is increased to cover 48% of capital cost (instead of the current 30%), which could imply a cost to the Federal Government of about $0.95/kW of installed capacity depending on the panel’s size. We demonstrate that implementation of ToD pricing can trigger adoption under a range of on- and off-peak price combinations. But our analysis also shows that the cost-effectiveness of ToD pricing is enhanced at higher ratios of on-peak to off-peak prices. |
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| Keywords: | Solar photovoltaic Real options Price volatility Demand responsiveness Time-of-day pricing Policy cost-effectiveness |
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