Has the evolution of renewable energy policies facilitated the construction of a new power system for China? A system dynamics analysis

Abstract

Renewable energy (RE) support policies play a significant role in promoting RE development. Both the feed-in-tariff (FIT) and renewable portfolio standards (RPS) policies have been implemented in China's power industry, but the market response is far from satisfactory. Additionally, a rush to promote electric power generation from RE sources poses operational hazards to the power system due to its intermittent nature. Therefore, this paper focuses on various forms of mainstream RE policies and develops system dynamics (SD)-based simulation models to examine their different incentive effects and evaluate the impacts on constructing a new power system for China. The simulation results show that the demand-side RPS (DRPS) outperforms the supply-side RPS (SRPS) policy at minimizing the costs of market participants, promoting RE consumption, constraining the damage for thermal power generation, and providing long-term incentives for RE industry investment, but lacks incentives for promoting the liquidity of Tradable green certificates (TGC) market. The combined FIT&RPS policy provides a transitional instrument to neutralize large volatility. When promoting energy transition, different RE policy forms should be enacted in stages and it is necessary to consider the construction of power grid systems and appropriately plan RE development to achieve balanced development.