Feed-in tariff or tax-rebate regulation? Dynamic decision model for the solar photovoltaic supply chain

Abstract

The feed-in tariff is a policy instrument designed to drop off the investment cost of solar energy, which has been thriving in Europe for many years. Similarly, tax-rebate regulation also aims to spur the diffusion of renewable technologies applied in America. However, it’s not clear that which policy is better off from the perspective of the members in the whole solar photovoltaic supply chain. To figure out this question, this paper establishes a novel solar photovoltaic supply chain structure in practice, including the government, a utility grid, an exclusive solar panel retailer, and households, where the households not only consume electricity but also generate energy to the utility. We also investigate a nonlinear dynamic system to study the long-term operations strategy, the stability of the equilibrium, and how the conservative and aggressive strategies impact the system. Interestingly, our finding shows chaos is not just an unfavorable phenomenon for everyone - for the players with risk preference, chaos might be a good ladder to achieve high returns. For those risk aversion players, we also provide a controlling method to control it back to a stable state.