The present study analyzes the cost-effectiveness of subsidies to photovoltaics (PV) in Japan through an electricity buy-back program from reducing carbon dioxide (CO_2) emissions point of view. For this analysis, the energy system of Japan is modeled using MARKAL, which is one of the energy system model based on multi-objective linear programming. With national PV capacity targets in mind and an assumed carbon tax, PV system sales price and electricity buy-back rates necessary to make PV cost-competitive with other energy technologies is estimated. The results show that, under the expected carbon tax of 6000 JPY/t-C, PV require continuous subsidies via buy-backs even if both fuel savings and Green Credit are taken into account. The need for such a subsidy, however, will approach zero by 2030 if PV system sales price can be reduced to 170 JPY/W. Annual revenue of the assumed carbon tax is sufficient to finance the estimated total annual subsidy. Estimated cost-effectiveness of the subsidy ranges from about 33000 JPY/t-C (300 USD/t-C) in around 2020 to zero in 2030. It is anticipated that the analysis will provide decision making support for prioritizing and optimizing subsidies to new energy technologies.
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