Which policy can promote renewable energy to achieve grid parity? Feed-in tariff vs. renewable portfolio standards

Abstract

Abstract China’s electricity market reform poses an urgent demand for grid parity of renewable energy (RE), however, the high initial investment cost makes it difficult to achieve. Although feed-in tariff (FIT) and renewable portfolio standards (RPS) schemes are both practical policy tools to support the development of the RE industry, which policy is more consistent with the goal of grid parity? Accordingly, based on the system dynamic model, this research studies the levelized cost of RE (LCOE) under FIT and RPS, respectively. The results show that: First, under the current FIT scheme, wind (onshore) and photovoltaic (PV) power both cannot achieve grid parity. To realize it, extra payouts in four categories of areas should at least be 0.236, 0.244, 0.299 and 0.261 CNY/kWh. Similarly, additional subsidies for PV in Tibet and the northwest region except Tibet need to be 0.924 and 0.764 CNY/kWh. Second, under the RPS, wind (onshore) power can basically achieve grid parity, but PV cannot. Subsidies for PV need at least to be 0.525 and 0.364 CNY/kWh to achieve grid parity. Therefore, compared with the current FIT in China, the policy combination of FIT and RPS adjusted to local conditions is more conducive to realizing grid parity.