6. Simulations of a Combination of Feed-in Tariffs and Capital Subsidies

In Chap. 5, we studied optimal combinations of feed-in tariffs (FITs) and capital subsidies. The theoretical investigation we developed through our microeconomic model provided some rigorous results as well as some unclear results. The purpose of this chapter is to confirm the results and develop new insights into those that were unclear in Chap. 5. To this end, we conduct simulations of the adoption of photovoltaic (PV) systems in the residential sector. At the same time, these simulations will help to clarify the theoretical model. Parameter values are set based on various sources of data. The simulations presented here have verified the theoretical results yielded in Chap. 5 and provided new findings with regard to the amount of PV electricity, the promotion cost, and social welfare. In particular, the promotion cost, which had been unclear in Chap. 5, showed a U–shaped curve, suggesting that there is a FIT level that minimizes the promotion cost. The comparison between the two cases, FITs for all PV electricity and FITs for surplus PV electricity, provided some reasonable results. Our simulation is intended to supplement the theoretical investigation in Chap. 5; it is not intended as an empirical investigation. More in-depth simulations should be conducted to obtain practical guidelines on setting FIT and capital subsidy levels.