The impact of feed-in tariff reduction and renewable portfolio standard on the development of distributed photovoltaic generation in China

In this paper we explore the impact of a feed-in tariff (FIT) reduction in combination with the intro-duction of a renewable portfolio standard (RPS) on the development of distributed photovoltaic gener-ation (DPVG) in China. This is done using system dynamics models that can simulate a DPVG's return on investment, installed capacity, levelized cost of electricity, and grid parity for multiple scenarios. The results show that the FIT reductions have a short-term negative effect on the DPVG installations. However, they can be performed in China without sacrificing the grid parity goal. In fact, FITs could be completely cancelled within the next 2-3 years. It is more effective to simply cancel the FITs after maintaining the current FITs for several years compared to a slow FIT reduction every year. After the FITs are cancelled, an RPS can effectively help continue the trend towards grid parity. However, we also need to consider the relation between the RPS quota, the installed capacity, and the tradable green certificate-supply/demand/price. The DPVG industry has already realized the demand-side grid parity, while resi- dential-and commercial-DPVG are expected to reach the supply-side grid parity within 4-7 years and 5-8 years, respectively. (c) 2021 Elsevier Ltd. All rights reserved.

Automated summary

This paper explores the impact of FIT reduction and the introduction of RPS on DPVG development in China. FIT reductions have a short-term negative effect on DPVG installations, but can be gradually reduced without sacrificing the grid parity goal. After FITs are cancelled, RPS can effectively help continue the trend towards grid parity.