A game theoretic approach for time-of-use pricing with considering renewable portfolio standard effects and investment in energy storage technologies under government interventions

Abstract

To remain in the competitive market, power companies, in addition to price competition, need to develop technologies to improve the reliability of electricity supply and achieve sustainable development goals. This paper explores energy pricing in an electricity supply chain consisting of renewable and conventional electricity producers and a distribution grid, focusing on improving supply reliability and achieving sustainable development goals. The study employs game theory to model government intervention in the electricity market through subsidization and Renewable Portfolio Standard (RPS) strategies. Three investment scenarios for improving reliability are considered, with producers determining wholesale prices and the distribution grid setting prices for low-and-high-load periods. The renewable producer and the distribution grid manage the reliability level by investing in energy storage technologies in the first and second scenarios, respectively, while it is ignored in the third scenario. The results reveal that optimal subsidy and RPS rates depend on the government's priorities regarding environmental effects, government revenue, and social welfare. Scenario two, is found to be the most favorable for improving supply reliability and achieving social welfare and environmental goals. Additionally, prioritizing social welfare maximization policy is found to be advantageous for producers' profit, the distribution grid, and supply reliability improvement.