Date of Award

Spring 2014

Degree Type

Thesis

Degree Name

Master of Science (MS)

Department

Agricultural Economics

First Advisor

Wallace E. Tyner

Committee Member 1

Michael S. Delgado

Committee Member 2

Juan P. Sesmero

Abstract

In recent years, the energy market in the US and globally is expanding the production of renewable energy. With other energy sources, solar energy for electricity is also expanding in the US. Indiana is one of the states expanding solar energy with solar PV systems. However, the economics of solar PV systems in Indiana have not been analyzed and electricity customers in Indiana are not informed enough about the economics of solar PV systems. Therefore, we conduct benefit cost analysis with several uncertain input variables to determine the economics of adopting solar PV systems in Indiana based on policy instruments that could increase adoption of solar PV systems. The specific objectives of this study are analyses of the cost distribution of solar PV systems compared with grid electricity in homes and on the probability that solar can be less than current electricity from grids under different combinations of policies.

We first do the analysis under current policy options and then do the analysis under potential policy options for a variety of scenarios. With the information addressed in our study, customers can be informed how beneficial or not it would be to adopt solar PV systems in their homes. Also, government can be informed how effective policies can be and how to manage policy options for encouraging solar PV systems.

The results show that the current policies are important in reducing the cost of solar PV systems. However, with current policies, there is only 50-50 chance of solar being cheaper than electricity from grids. However, if potential policies are implemented, solar PV systems can be more economical than electricity from the grids. Thus, it is arguable that government still should implement other policies to encourage people to adopt solar PV systems in Indiana.

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