  Feed in tariff (FiT) is one of the most efficient ways that many governments
throughout the world use to stimulate investment in renewable energies (REs)
technology. For governments, financial management of the policy is very
challenging as that it needs a considerable amount of budget to support RE
producers during the long remuneration period. In this paper, we illuminate
that the early growth of REs capacity could be a temporary boost and the system
elements would backlash the policy if financial circumstances are not handled
well. To show this, we chose Iran as the case, which is in the infancy period
of FiT implementation. Iran started the implementation of FiT policy in 2015
aiming to achieve 5 GW of renewable capacity until 2021. Analyses show that the
probable financial crisis will not only lead to inefficient REs development
after the target time (2021), but may also cause the existing plants to fail.
Social tolerance for paying REs tax and potential investors trust emanated from
budget related mechanisms are taken into consideration in the system dynamics
model developed in this research to reflect those financial effects, which have
rarely been considered in the previous researches. To prevent the financial
crisis of the FiT funding and to maintain the stable growth in long term, three
policy scenarios are analyzed: continuation of the current program with higher
FiT rates, adjusting the FiT rates based on the budget status, and adjusting
the tax on electricity consumption for the development of REs based on the
budget status. The results demonstrate that adjusting the tax on electricity
consumption for the development of REs based on budget status leads to the best
policy result for a desired installed capacity development without any negative
social effects and financial crises.
