Subsidy Policy Design for Increasing Solar Photovoltaic Installed Capacity in China -A System Dynamics Based Study

Abstract

China's photovoltaic (PV) based electricity generating capacity is obviously lagging behind the world level, although its manufacturing capacity of PV cells and modules has remained ahead worldwide since 2006. The Chinese government is the major investor contributing to PV-based installed generating capacity in China. A trial subsidy policy has been implemented by the Chinese government since 2007 to encourage the participation of enterprise investment. In terms of Chinese government's goals on installed PV-based generating capacity in 2010 and 2020, the historical data shows a sluggish development trend, which raises doubts about the viability of the government's goals. A system dynamics model was built to study the problem and used to design and test policy options for increasing installed PV-based generating capacity in China. It was found that lack of funds and inactive enterprise investment are the major reasons for the sluggish unfolding of China's installed PV-based generating capacity. Several policy suggestions are developed correspondingly, one of which is to increase PV fraction so as to solve the funds constraints, another of which is to raise up the subsidy granted to the enterprises to catalyze enterprise investment to accelerate the development of PV-based generating capacity in China.