Optimal subsidy reduction strategies for photovoltaic poverty alleviation in China: A cost-benefit analysis

Abstract

The subsidy policies for photovoltaic poverty alleviation project in China need an urgent reform because this project is not only more dependent on subsidies but also inefficient in using subsidies. To relieve financial difficulties, we construct the investment benefit evaluation model for photovoltaic poverty alleviation projects. By classifying the resource areas into four types, a novel cost-benefit index for centralized poverty alleviation projects under different subsidy reduction schemes is calculated. Then, a comparative analysis is conducted for scenarios with or without value-added tax (VAT) preferential policy. We also discuss the selection of subsidy reduction strategies for targeted poverty alleviation using photovoltaic power. We find that: ⅰ) reducing installed capacity cost per unit is an optimal strategy to improve the profitability of photovoltaic poverty alleviation project. ⅱ) The VAT preferential policy, which can be used a collocated policy, will improve the profitability of photovoltaic poverty alleviation projects. ⅲ) At present, a complete withdrawal of subsidies is not feasible. However, under the VAT preferential policy, cutting down the subsidy by 50% once is theoretically possible. ⅳ) The subsidy for photovoltaic poverty alleviation cannot adopt “one-size-fits all approaches” in all regions. A subsidy reduction policy is preferred for the Type Ⅰ and Type Ⅱ resource areas.