IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v330y2025ics0360544225025435.html

An evaluation of incentive policy effects on solar power plant cost analysis: a comparative case study approach

Author

Listed:
  • Erdem, Murat

Abstract

This study examines the economic feasibility of solar power plants and the renewable energy support mechanisms in Konya province, a region renowned for its high solar energy potential and leadership in solar energy investments in Turkey. The research evaluates the positive and negative effects of these mechanisms in Turkey from the perspective of investors, using practical examples. Although the analysis focuses on a region in Turkey, the findings and recommendations hold relevance for developing countries that are significantly affected by exchange rate fluctuations and inflation. The installation cost of a 1 MW solar power plant (SPP) is USD 864,517. The analysis spans a range of scenarios with different starting dates, extending up to December 31, 2024. Between 2015 and 2024, the total annual incentives provided to investors are calculated as follows: 726 cents USD/kWh, 653.4 cents USD/kWh, 580.05 cents USD/kWh, 508.2 cents USD/kWh, 435.6 cents USD/kWh, 363 cents USD/kWh, 290 cents USD/kWh, 217.8 cents USD/kWh, 136.74 cents USD/kWh, and 59.4 cents USD/kWh, respectively. To achieve a payback period for solar power plants between 5 and 8 years, the incentive rate should be set between 15 cents USD/kWh and 20 cents USD/kWh. Accordingly, to enhance the sustainability and predictability of renewable energy investments, it is recommended to either remove or increase the upper limit applied within the incentive mechanism. Additionally, it is suggested that the denominators for PPI, CPI, and exchange rates in the mathematical formula be adjusted to incorporate historical data from earlier periods.

Suggested Citation

  • Erdem, Murat, 2025. "An evaluation of incentive policy effects on solar power plant cost analysis: a comparative case study approach," Energy, Elsevier, vol. 330(C).
    • Handle: RePEc:eee:energy:v:330:y:2025:i:c:s0360544225025435
    DOI: 10.1016/j.energy.2025.136901
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544225025435
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2025.136901?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Mir-Artigues, Pere & Cerdá, Emilio & del Río, Pablo, 2015. "Analyzing the impact of cost-containment mechanisms on the profitability of solar PV plants in Spain," Renewable and Sustainable Energy Reviews, Elsevier, vol. 46(C), pages 166-177.
    2. Gaafar Muhammed & Neyre Tekbiyik-Ersoy, 2020. "Development of Renewable Energy in China, USA, and Brazil: A Comparative Study on Renewable Energy Policies," Sustainability, MDPI, vol. 12(21), pages 1-29, November.
    3. Farangi, Mostafa & Asl Soleimani, Ebrahim & Zahedifar, Mostafa & Amiri, Omid & Poursafar, Jafar, 2020. "The environmental and economic analysis of grid-connected photovoltaic power systems with silicon solar panels, in accord with the new energy policy in Iran," Energy, Elsevier, vol. 202(C).
    4. Gürtürk, Mert & Ucar, Ferhat & Erdem, Murat, 2022. "A novel approach to investigate the effects of global warming and exchange rate on the solar power plants," Energy, Elsevier, vol. 239(PD).
    5. Mirza, Umar K. & Ahmad, Nasir & Harijan, Khanji & Majeed, Tariq, 2009. "Identifying and addressing barriers to renewable energy development in Pakistan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(4), pages 927-931, May.
    6. Long, Yong & Liu, Xia, 2024. "Optimal green investment strategy for grid-connected microgrid considering the impact of renewable energy source endowment and incentive policy," Energy, Elsevier, vol. 295(C).
    7. Lion Hirth, 2018. "What Caused the Drop in European Electricity Prices? A Factor Decomposition Analysis," The Energy Journal, , vol. 39(1), pages 143-158, January.
    8. Shafiee, Shahriar & Topal, Erkan, 2009. "When will fossil fuel reserves be diminished?," Energy Policy, Elsevier, vol. 37(1), pages 181-189, January.
    9. Rangel, Richard & Arango-Manrique, Adriana & Corredor, Lesme & Sanjuan, Marco, 2024. "Assessment of Colombian renewable energy auctions policy: Enabler or barrier for concentrating solar power plants," Energy Policy, Elsevier, vol. 193(C).
    10. Ozoegwu, Chigbogu Godwin & Akpan, Patrick Udeme-obong, 2021. "Solar energy policy directions for safer and cleaner development in Nigeria," Energy Policy, Elsevier, vol. 150(C).
    11. Hadibi, Tarik & Boubekri, Abdelghani & Mennouche, Djamel & Benhamza, Abderrahmane & Kumar, Anil & Bensaci, Cheyma & Xiao, Hong-Wei, 2022. "Effect of ventilated solar-geothermal drying on 3E (exergy, energy, and economic analysis), and quality attributes of tomato paste," Energy, Elsevier, vol. 243(C).
    12. Zhao, Xu & Luo, Dongkun, 2017. "Driving force of rising renewable energy in China: Environment, regulation and employment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 68(P1), pages 48-56.
    13. Höök, Mikael & Tang, Xu, 2013. "Depletion of fossil fuels and anthropogenic climate change—A review," Energy Policy, Elsevier, vol. 52(C), pages 797-809.
    14. Li, Jinchao & Sun, Zihao & Niu, Xiaoxuan & Li, Shiwei, 2024. "Economic optimization scheduling of virtual power plants considering an incentive based tiered carbon price," Energy, Elsevier, vol. 305(C).
    15. Islam, Md Tasbirul & Huda, Nazmul & Saidur, R., 2019. "Current energy mix and techno-economic analysis of concentrating solar power (CSP) technologies in Malaysia," Renewable Energy, Elsevier, vol. 140(C), pages 789-806.
    16. Gürtürk, Mert & Oztop, Hakan F. & Hepbasli, Arif, 2015. "Comparison of exergoeconomic analysis of two different perlite expansion furnaces," Energy, Elsevier, vol. 80(C), pages 589-598.
    17. Lo, Kevin, 2014. "A critical review of China's rapidly developing renewable energy and energy efficiency policies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 508-516.
    18. Rahman Mohamed, Abdul & Lee, Keat Teong, 2006. "Energy for sustainable development in Malaysia: Energy policy and alternative energy," Energy Policy, Elsevier, vol. 34(15), pages 2388-2397, October.
    19. Kaygusuz, Kamil, 2012. "Energy for sustainable development: A case of developing countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(2), pages 1116-1126.
    20. Erdem, Murat & Gürtürk, Mert, 2025. "Economic analysis of the impact of Turkey's renewable support mechanism on solar energy investment," Utilities Policy, Elsevier, vol. 92(C).
    21. repec:aen:journl:ej39-1-hirth is not listed on IDEAS
    22. Shand, Jaribu & Glakpe, Emmanuel & Ivey, Chase, 2025. "Policy implications of implementing residential PV solar energy systems in developing regions," Energy Policy, Elsevier, vol. 196(C).
    23. Joshua M. Pearce & Nelson Sommerfeldt, 2021. "Economics of Grid-Tied Solar Photovoltaic Systems Coupled to Heat Pumps: The Case of Northern Climates of the U.S. and Canada," Energies, MDPI, vol. 14(4), pages 1-17, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Erdem, Murat & Gürtürk, Mert, 2025. "Economic analysis of the impact of Turkey's renewable support mechanism on solar energy investment," Utilities Policy, Elsevier, vol. 92(C).
    2. Ritter, Hendrik & Zimmermann, Karl, 2019. "Cap-and-Trade Policy vs. Carbon Taxation: Of Leakage and Linkage," EconStor Preprints 197796, ZBW - Leibniz Information Centre for Economics.
    3. Zou, Tong & Guo, Pibin & Li, Fanrong & Wu, Qinglong, 2024. "Research topic identification and trend prediction of China's energy policy: A combined LDA-ARIMA approach," Renewable Energy, Elsevier, vol. 220(C).
    4. Ahmad, Nasir & Derrible, Sybil, 2018. "An information theory based robustness analysis of energy mix in US States," Energy Policy, Elsevier, vol. 120(C), pages 167-174.
    5. Fuquan Zhao & Fanlong Bai & Xinglong Liu & Zongwei Liu, 2022. "A Review on Renewable Energy Transition under China’s Carbon Neutrality Target," Sustainability, MDPI, vol. 14(22), pages 1-27, November.
    6. Muhammad Aslam Mohd Safari & Nurulkamal Masseran & Alias Jedi & Sohif Mat & Kamaruzzaman Sopian & Azman Bin Abdul Rahim & Azami Zaharim, 2020. "Rural Public Acceptance of Wind and Solar Energy: A Case Study from Mersing, Malaysia," Energies, MDPI, vol. 13(15), pages 1-24, July.
    7. Luthra, Sunil & Govindan, Kannan & Kharb, Ravinder K. & Mangla, Sachin Kumar, 2016. "Evaluating the enablers in solar power developments in the current scenario using fuzzy DEMATEL: An Indian perspective," Renewable and Sustainable Energy Reviews, Elsevier, vol. 63(C), pages 379-397.
    8. Karatayev, Marat & Hall, Stephen & Kalyuzhnova, Yelena & Clarke, Michèle L., 2016. "Renewable energy technology uptake in Kazakhstan: Policy drivers and barriers in a transitional economy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 66(C), pages 120-136.
    9. Yasar, Abdullah & Nazir, Saba & Tabinda, Amtul Bari & Nazar, Masooma & Rasheed, Rizwan & Afzaal, Muhammad, 2017. "Socio-economic, health and agriculture benefits of rural household biogas plants in energy scarce developing countries: A case study from Pakistan," Renewable Energy, Elsevier, vol. 108(C), pages 19-25.
    10. Jayaraman, K. & Paramasivan, Lavinsaa & Kiumarsi, Shaian, 2017. "Reasons for low penetration on the purchase of photovoltaic (PV) panel system among Malaysian landed property owners," Renewable and Sustainable Energy Reviews, Elsevier, vol. 80(C), pages 562-571.
    11. Rashiqa Abdul Salam & Khuram Pervez Amber & Naeem Iqbal Ratyal & Mehboob Alam & Naveed Akram & Carlos Quiterio Gómez Muñoz & Fausto Pedro García Márquez, 2020. "An Overview on Energy and Development of Energy Integration in Major South Asian Countries: The Building Sector," Energies, MDPI, vol. 13(21), pages 1-37, November.
    12. Linus Yinn Leng Ang & Fangsen Cui & Kian-Meng Lim & Heow Pueh Lee, 2023. "A Systematic Review of Emerging Ventilated Acoustic Metamaterials for Noise Control," Sustainability, MDPI, vol. 15(5), pages 1-20, February.
    13. Lv, Zhike & Liu, Wangxin & Xu, Ting, 2022. "Evaluating the impact of information and communication technology on renewable energy consumption: A spatial econometric approach," Renewable Energy, Elsevier, vol. 189(C), pages 1-12.
    14. Narayan Parab & Ramashanti Naik & Y. V. Reddy, 2024. "Renewable energy, economic growth and sustainable development: A model development in the light of empirical insights," Natural Resources Forum, Blackwell Publishing, vol. 48(2), pages 572-593, May.
    15. Wu, Xifeng & Xu, Yuechao & Lou, Yuting & Chen, Yu, 2018. "Low carbon transition in a distributed energy system regulated by localized energy markets," Energy Policy, Elsevier, vol. 122(C), pages 474-485.
    16. Wan-Jiun Chen, 2022. "Toward Sustainability: Dynamics of Total Carbon Dioxide Emissions, Aggregate Income, Non-Renewable Energy, and Renewable Power," Sustainability, MDPI, vol. 14(5), pages 1-27, February.
    17. Leonidas Matsakas & Christos Nitsos & Dimitrij Vörös & Ulrika Rova & Paul Christakopoulos, 2017. "High-Titer Methane from Organosolv-Pretreated Spruce and Birch," Energies, MDPI, vol. 10(3), pages 1-15, February.
    18. Wang, Ying & Zhang, Dayong & Ji, Qiang & Shi, Xunpeng, 2020. "Regional renewable energy development in China: A multidimensional assessment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 124(C).
    19. Thakshila Nadeeshani Dharmapriya & Po‑Jung Huang & Dissanayakage Dilshan Sampath Dissanayaka & Jinendra Jayasanka Dharmapriya & Paichi Pat Shein, 2023. "Survey on social awareness towards energy conservation and ESD lesson on biofuel as a renewable energy source," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 13(4), pages 658-667, December.
    20. Tran Thi Lan & Sopin Jirakiattikul & M. S. Chowdhury & Dilawer Ali & Le Duc Niem & Kuaanan Techato, 2020. "The Effect of Retail Electricity Price Levels on the FI Values of Smart-Grid Rooftop Solar Power Systems: A Case Study in the Central Highlands of Vietnam," Sustainability, MDPI, vol. 12(21), pages 1-22, November.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:330:y:2025:i:c:s0360544225025435. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.