Assessing the Effect of Incentive Policies on Residential PV Investments in Colombia

Abstract

As the cost of solar photovoltaic (PV) falls, their potential for transforming modern electricity generation increases. Solar PV provides a simpler way of producing clean and affordable energy, which makes it an attractive investment. Great investments in solar PV have occurred in industrialized countries, but government efforts to promote this technology have not been effective in nonindustrialized countries. Despite this, some of these countries may have a high solar PV potential, such as Colombia, where policies to encourage solar PV are only just starting to take place. Therefore, this paper proposes a simulation model to assess different policies—feed-in tariff, net metering, and capital subsidy—to promote solar PV investments in the Colombian residential sector. Policies are assessed considering the criteria of efficiency and effectiveness. Simulation results suggest that (i) net metering is the most efficient policy with a cost indicator of 20,298 USD/MW; (ii) feed-in tariff is the most effective policy as it reaches the highest level of avoided CO2 emissions—4,792,823 million tons of CO2—and a meaningful PV installed capacity of 7522 MW; (iii) capital subsidy is the least efficient policy as it has the highest cost indicator of 509,616 USD/MW.

Keywords

• feed-in tariff
• net metering
• capital subsidy
• PV adoption
• efficiency
• effectiveness
• CO2 emissions