Renewable energy incentives for project owners representing communities with heavily subsidised fossil fuel-based electricity

Abstract

The significance of renewable energy (RE) as an essential component of sustainable cities is widely acknowledged. Nevertheless, the global transition towards RE faces numerous hurdles, including RE financing, particularly in regions where electricity generation from fossil fuels is heavily subsidized. This necessitates the formulation of effective incentives that can encourage project owners to invest in the transition towards RE. This manuscript proposes a comprehensive framework for incentivizing RE project owners and offers three types of incentives: capital-based, production-based, and grid support incentives. The effectiveness of the proposed set of incentives is evaluated through a detailed techno-economic analysis which aims to minimize Net Present Cost while considering power balance and grid constraints. It encompasses various aspects of RE systems, including optimal sizing of photovoltaics, batteries, inverters, and optimal power flow, at different levels of RE penetration. Additionally, the framework explores the possibility of achieving 100 % RE through off-grid systems, shedding light on potential challenges and opportunities. Further, economic indicators such as the Cost of Energy, Payback Period, Return on Investment, and Internal Rate of Return are also analyzed to evaluate the acceptability of the proposed framework. Results demonstrate that the presented incentivizing framework has the potential to facilitate RE adoption, positioning it as a valuable policy and investment opportunity for RE project owners. This yields substantial benefits including reduced financial burdens, improved return on investment, and access to diverse revenue streams.