Can the Renewable Portfolio Standards improve social welfare in China's electricity market？

Abstract

Renewable portfolio standards (RPS) is an institutional change from Feed-in Tariff (FIT) to government policy and market mechanism. Is it conducive to improve China's social welfare? Given this problem, this paper constructs the social welfare function under the FIT policy and RPS system respectively based on consumer heterogeneity and simulates the social welfare of China under the two schemes on the basis of combining the real economic situation of China. The results show that: (1) Based on China's real economic situation, the implementation of RPS has achieved Pareto improvement and improves China's social welfare. (2) Under the RPS, compared with the actual situation of oligopoly in China's electricity market, competition can improve social welfare better. (3) The effective implementation of RPS depends on the quota level of the government's scientific design. As far as China's current real economic situation is concerned, when the quota is set in the interval (0,0.5], the social welfare under the RPS is always higher than that under the FIT. Therefore, to improve social welfare and promote low-carbon energy transition, China should effectively promote the implementation of RPS, a mandatory institutional change, and strengthen the system construction of RPS.