Renewable energy input strategy considering different electricity price regulation policies

Abstract

This paper examines the impact of the electricity price cap regulation and different policies on renewable energy inputs, electricity prices, demands, and the profits of power firm. Specifically, we compare the impact of the peak-trough electricity price policy (PP policy) and the uniform electricity price policy (UP policy) based on electricity price cap regulation. The findings are as follows: (1) Regardless of the cap, the UP policy consistently results in no lower renewable energy input level and total electricity demand compared to the PP policy. However, power firm earns higher profit in the PP policy. (2) During peak period, the electricity price in the PP policy is not lower than in the UP policy, but the electricity demand is lower. Conversely, during the trough period, the electricity price in the PP policy is lower, and the electricity demand is higher than in the UP policy. (3) When the firm is subject to the electricity price cap regulation, increasing the cap leads to higher electricity prices, renewable energy input levels, total demands, and firm profits. In the absence of the cap regulation, factors of cross-price competition and renewable energy preference increase all equilibrium solutions, while the renewable energy input cost factor has the opposite effect. In the field of renewable energy input, there is no literature considering the impact of the electricity price cap regulation, while our study considers the input behavior of power firm to renewable energy through electricity price cap regulation and different pricing policies. The findings provide substantial theoretical and practical insights for power firm and government in decision-making processes.