Energy storage subsidy estimation for microgrid: A real option game-theoretic approach

Abstract

Microgrid development is presently limited due to high costs, especially its energy storage system (ESS) component. ESS subsidy policies, as the main response options, seem essential to be explored to promote the diffusion of microgrid. In this study, we propose an evolutionary game model combined with real options to guide ESS subsidy policies for microgrid by applying to a small electricity network served by a regulated utility. As there exists market share arrangements during the game, a multi-objective programming is formulated to determine the optimal investment capacity for each market participant. To evaluate our model, we provide a numerical example to demonstrate how different ESS subsidies affect the fluctuation amplitudes and equilibrium positions in microgrid diffusion process. The results indicate that price subsidy for energy storage has more significant effect than initial cost subsidy for microgrid development. In addition, although the importance of ESS electricity price subsidy is reflected, its combination with initial cost subsidy may both ensure investment value of microgrid and reduce the initial cost of such a capital-intensive component.