Effects of a cut-off in feed-in tariffs on photovoltaic capacity: Evidence from Germany

Abstract:

We analyze the effects of feed-in tariff (FIT) adjustments on installed photovoltaic capacity in Germany. We find that the current system temporarily accelerates installments and does not countervail over-investment. Therefore, we design three alternative FIT regimes: (i)constant FITs, (ii) linearly decreasing FITs, and (iii) FIT adjustments related to the changes of photovoltaic panel prices. Simulations of installed capacities indicate that alternative adjustment mechanisms could be more appropriate to meet the government's installation target. Moreover, we calculate the consumers' burden induced by the FITs and find that it might be reduced by alternative mechanisms.