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 introduction of a renewable portfolio standard (RPS) on the development of distributed photovoltaic generation (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 residential- and commercial-DPVG are expected to reach the supply-side grid parity within 4–7 years and 5–8 years, respectively. • Development of a system dynamics model of China's distributed PV generation. • Simulation and cost/investment analysis with different scenarios. • Effect of feed-in tariff reductions and introduction of renewable policy standard. • Grid-parity analysis of residential and commercial distributed PV generation in China. [ABSTRACT FROM AUTHOR]