Green manufacturers’ power strategy in the smart grid era

Abstract

Conventional electricity generation from coal and natural gas is one of the largest greenhouse gas sources and using wind power is an effective way to achieve climate neutrality. Realizing this, green manufacturers such as SC Johnson and Silk decide to use 100% wind power for their manufacture. This enables the manufacturers to receive green certifications and hence, attract more customers. However, wind power can be unstable, so some green manufacturers like New Belgium Brewing purchase power from both the regular power supplier and the wind power supplier, resulting in a discount of market expansion. Modelling this complex system can be challenging that requires the use of meta-heuristic algorithms, so we build a game-theoretic model comprising of a wind power supplier, a regular power supplier and a green manufacturer to examine whether the green manufacturer is more benefited under all-wind power strategy. This helps clarify the strategic perdition about the firms’ equilibrium decisions. We find that the green manufacturer prefers all-wind power strategy when (a) the discount effect is significant and the market potential is greatly expanded; (b) both the discount effect and the market expansion are moderate. We further study the impact of the environmental effect, the improvement of wind power stability and the production cost uncertainty, finding that the main results are qualitatively unchanged.