The Cost-Effectiveness of Solar PV Deployment Subsidies

This study attempts to calculate the financial value of the impacts of feed-in tariffs in Germany and Spain, in four key areas: the reduction of carbon emissions; the creation of jobs; improvements to energy security; and the stimulation of cost-reductions in solar PV technology. It then calculates the cost of Germany and Spain’s feed-in tariffs and compares this with the value of the impacts, asking: can it be shown that subsidies for solar PV in these countries are cost-effective? The study finds that useful estimates of financial value can only be calculated with respect to carbon emissions and job creation and that in each of these areas more robust methodologies would be desirable to improve these estimates. Nonetheless, it also finds that only under the most optimistic of assumptions does the financial value of these impacts begin to approach the expenditure on deployment of solar PV. In a world where economic policy is increasingly calling on governments to invest in greening their economies, the study concludes that countries and international policy institutions would do well to invest in developing robust methodologies for estimating the cost-effectiveness of renewable energy support schemes, in order to identify when, where and how these policies can most effectively harness scarce public resources.