Economic feasibility of the investment in residential photovoltaics system considering the effects of subsidy policies: A Korean case

Abstract

The economic feasibility of the investment is critical for residential users’ decision making in investing in photovoltaic (PV) systems because the high costs of installing PV technology may be burdensome. Therefore, governments in many countries have been implementing policies to reduce the economic burden of household users' PV investments and thus promote solar energy to household users. The purpose of this paper is to perform an economic feasibility analysis of investments in residential PV systems that considers the effects of several subsidy plan alternatives using the empirical data of Korea. The result shows that the residential PV investment project would be economically viable without subsidy; however, a payback period exceeds 8 years, which could be perceived by residential customers as too long to be attractive enough to invest in a PV system at present. In addition, we found that the net present value is highest under the production based subsidy scheme, whereas the payback period is shortest with a lump-sum subsidy.

Notes

1 KRW is the monetary unit of Korea. The exchange rate for $1 was approximately 1,150 KRW in Jan 2020.

2 http://solarmap.seoul.go.kr/main/mainMap.do

3 https://desktop.arcgis.com/en/arcmap/10.3/tools/spatial-analyst-toolbox/an-overview-of-the-solar-radiation-tools.htm

Additional information

Funding

This work was supported by Basic Science Research Program through the National Research Foundation of Korea(NRF) funded by the Ministry of Science, ICT and Future Planning (NRF-2017R1A2B2005894).

Notes on contributors

Jingu Jang

Jingu Jang is affiliated with Global Service Parts Operation Team at Samsung Electronics. He received his B.S. in Industrial Engineering and Mechanical Engineering from Seoul National University, South Korea. His research interests include engineering economic analysis, supply chain optimization and inventory management.

Moonkyu Seo

Moonkyu Seo is currently pursuing a B.S. in Industrial Engineering at Seoul National University, South Korea. His research interests include optimization on utility systems and big data analytics.

Giwon Nam

Giwon Nam is affiliated Semiconductor Production Management Team at Samsung Electronics. He earned his B.S. in Industrial Engineering from Seoul National University, South Korea. His research interests include engineering economics and production optimization.

Deok-Joo Lee

Deok-Joo Lee received B.E., M.S. and Ph.D. degree in the Dept. of Industrial Engineering from Seoul National University, South Korea. Currently he is a professor and the chair of the Dept. of Industrial Engineering, Seoul National University. He has published more than 50 academic papers in scholarly journals including European Journal of Operational Research, OMEGA, Technological Forecasting & Social Changes, Applied Energy, Renewable & Sustainable Energy Reviews, and Transportation Research Part A. His research interests include engineering economics, economic analysis of energy systems, and real option theory.