Feed-in tariff or sheep farming subsidy? Implications of promoting photovoltaic energy by solar sheep raising

Abstract

This paper theoretically establishes a solar sheep game model under three cases to capture the friction among the stockholders including the government, PV investors, and shepherds. Nash equilibrium has been revealed for analyzing the impact of different policies on the benefits of each player. The results show that the implementation of the feed-in tariff (FIT) policy can maximize the government’s revenue. However, when the government focuses on promoting poverty alleviation for shepherds, the sheep farming (SF) subsidy policy is more efficient than FIT if the positive effect of the PV panel on sheep raising is not enough. Besides, dynamic system models are established either to study the bounded rationality behavior during the decision process in the long run. Thresholds regarding speed of decision adjusting for each player are found. Results also show the system will lose stability if players adjust their decisions too frequently. Based on data from Talatan and Cascadilla, numerical analysis has been applied to illustrate the managerial implications from the proposed model.