Renewable Portfolio Standards Schemes Research Articles

How to improve the effectiveness of Chinese green certificate market? A complex network and social influence analysis

To achieve the 2030 carbon peak target and promote the development of renewable energy, China introduced the renewable portfolio standard (RPS) and tradable green certificate (TGC) trading mechanism in 2017. However, for several years, its TGC market remained depressed. To solve this issue, this paper creatively introduced social influence and complex networks into the evolutionary game model between generators to analyze the evolution of power producers’ behaviors, and to study the impacts of social influence, key institutional parameters, and network influence. The main results show that: (1) The positive intervention of public opinion is important to the vulnerable early TGC market, but its efficiency shows a marginal decline. (2) The evolution process can be accelerated through social interactions, and the strategies adopted by central firms in the network significantly influence the evolution result, especially when “TGC alliances” are formed. (3) According to the preference of social influence and profit, participants can be divided into two types: “changeable” (who favors interests), “firm” (who values social approval), and the latter has a greater market pulling effect. This paper provides implications for policymakers from new perspectives and extends the research scope of the RPS scheme and the TGC market.

Price and subsidy under uncertainty: Real-option approach to optimal investment decisions on energy storage with solar PV

Renewable generation sources still have not achieved economic validity in many countries including Korea, and require subsidies to support the transition to a low-carbon economy. An initial Feed-In Tariff (FIT) was adopted to support the deployment of renewable energy in Korea until 2011 and then was switched to the Renewable Portfolio Standard (RPS) to implement more market-oriented mechanisms. However, high volatilities in electricity prices and subsidies under the RPS scheme have weakened investment incentives. In this study we estimate how the multiple price volatilities under the RPS scheme affect the optimal investment decisions of energy storage projects, whose importance is increasing rapidly because they can mitigate the variability and uncertainty of solar and wind generation in the power system. We applied mathematical analysis based on real-option methods to estimate the optimal trigger price for investment in energy-storage projects with and without multiple price volatilities. We found that the optimal trigger price of subsidy called the Renewable Energy Certificate (REC) under multiple price volatilities is 10.5% higher than that under no price volatilities. If the volatility of the REC price gets doubled, the project requires a 26.6% higher optimal investment price to justify the investment against the increased risk. In the end, we propose an auction scheme that has the advantage of both RPS and FIT in order to minimize the financial burden of the subsidy program by eliminating subsidy volatility and find the minimum willingness-to-accept price for investors.

Decarbonisation & Power Purchase Agreements – An economic Analysis of the regulatory Status Quo in China

Since January 2020, the Chinese Renewable Portfolio Standard (RPS) is in force and aims on paving the way for China to realise its ambitious climate target of reducing 18% tCO2e during the 14th Five-Year Plan until 2025. Especially in terms of electricity-related greenhouse gas emissions, corporates are increasingly under pressure to decarbonise their business cases in order to maintain access to capital markets. The paper provides an overview of available contractual solutions for reducing the corporate carbon footprint according to Sustainable Development Goal No. 7 and 13. In this context, Power Purchase Agreements (PPAs) are analysed as an alternative way to realize corporate sustainability goals in China. The paper also identifies main structural challenges in the Chinese PPA market and provides regulatory recommendations to enable corporates to secure their access to renewable energy via PPAs. By analysing the green electricity certificate (GEC) system under the RPS scheme, both high regulatory risks and the phenomenon of double counting are identified as two of the main challenges. A further finding is that the current short-term tenor of PPAs does not incentivise RE asset owners to contract with private institutions, which from the corporate’s point of view leads to a limited availability of qualified renewable energy assets. Besides that, the lack of inter-provincial PPAs hampers the corporate decarbonisation since the corporate electricity load is usually not located in the resource-rich Northern and Western provinces.

A critical review of the World's first renewable portfolio standard (RPS) for large electricity users in Taiwan: The return of the RPS?

To deal with climate change, most countries in the world have already set their own emission reduction targets and developed subsidy schemes to promote the production of renewable electricity (RE). In REN 21's Renewables 2019 Global Status Report, mainly three types of dominant RE promotion schemes are identified: feed-in policies, renewable portfolio standard (RPS)/quota policies, and tendering. Based on the statistics, we found a trend of an increase in both the feed-in tariff and tendering scheme and a decrease in the RPS scheme. Despite this trend, in April 2019, the Taiwanese Parliament passed an amendment to the Renewable Energy Act of 2009 and introduced an RPS scheme for large-electricity users to promote the 2025 energy transition and nuclear-free homeland policy. This is not only the first of this type worldwide but also the most stringent, because the bundled renewable energy certificate (REC) must meet the requirement. This article will provide an overview and a critical review of this scheme, particularly about its effectiveness in promoting further RE development.

The impact of renewable portfolio standard on retail electricity market: A system dynamics model of tripartite evolutionary game

The renewable portfolio standard (RPS) in China is to put into effect at the beginning of 2020, which will inevitably affect the strategy of stakeholders in retail electricity market. To study the effect of RPS on retail electricity market, we take the regulators (energy regulatory authorities) and two types of power sales companies with heterogeneous strength into consideration. Then a system dynamics model of tripartite evolutionary game is developed to analyze the strategy interaction of stakeholders and simulate the corresponding evolution process. Based on the background of Chinese renewable power industry, the scenario analysis method is employed to investigate the impacts of key parameters in relation with RPS scheme on stakeholders’ strategy selections. The results show that, to basically ensure all the power sales companies comply with quota obligation, TGC price of different stages should maintain at desired levels, net profit of renewable power sales should be no less than that of conventional power sales, and incentive and punishment should be within a reasonable range. In particular, the results reveal some policy effects such as reversal effect, blocking effect and over-reliance effect. More importantly, these results provide some policy recommendations for the rapid development of renewable power industry.

The development of the renewable energy power industry under feed-in tariff and renewable portfolio standard: A case study of China's wind power industry

Among the regulatory policies, feed-in tariffs (FIT) and renewable portfolio standards (RPS) are the most popular to promote the development of renewable energy power industry. This paper uses system dynamics (SD) to establish models of long-term development of the renewable energy power industry under FIT and RPS schemes, and provides a case study of China's wind power industry by using scenario analysis method. The model, on the one hand, not only clearly shows the complex logical relationship between the factors but also reveals the process of coordination between the two policy tools in the development of the renewable energy power industry. On the other hand, it provides a reference for scholars to study similar problems in different countries, thereby facilitating an understanding of the renewable energy power's long-term sustainable development pattern under FIT and RPS schemes, and helping to provide references for policy-making institutions. The results show that the integrate implementation of FIT and RPS can promote long-term and rapid development of China's wind power industry given the constraints and actions of the mechanisms of RPS quota proportion, the tradable green certificates (TGC) valid period, and fines. In addition, in the period of the construction of the TGC market, RPS quota growth rate and fine have a no significant effect on industrial development, however, with TGC market game becoming more and more fierce, both of them have a significant positive impact on the long-term development of the industry. TGC valid period has little effect on industrial development in our study. At the end of the paper, policy implications are offered as references for the government.

The development of China's biomass power industry under feed-in tariff and renewable portfolio standard: A system dynamics analysis

Among the regulatory policies, feed-in tariffs (FIT) and renewable portfolio standards (RPS) are the most popular to promote the development of renewable energy power industry. This paper uses system dynamics (SD) to establish models of long-term development of China's biomass power industry under FIT and RPS schemes, and provides a case study by using scenario analysis method. The model, on the one hand, not only clearly shows the complex logical relationship between the factors but also reveals the process of coordination between the two policy tools in the development of the industry. On the other hand, it provides a reference for scholars to study similar problems in different countries, thereby facilitating an understanding of biomass power's long-term sustainable development pattern under FIT and RPS schemes, and helping to provide references for policy-making institutions. The results show that in the perfect competitive market, the implementation of RPS can promote long-term and rapid development of China's biomass power industry given the constraints and actions of the mechanisms of RPS quota proportion, the TGC valid period, and fines, compared with FIT. At the end of the paper, policy implications are offered as references for the government.

The policy effects of feed-in tariff and renewable portfolio standard: A case study of China’s waste incineration power industry

Among the regulatory policies, feed-in tariffs (FIT) and renewable portfolio standards (RPS) are the most popular to promote the development of renewable energy power industry. They can significantly contribute to the expansion of domestic industrial activities in terms of sustainable energy. This paper uses system dynamics (SD) to establish models of long-term development of China’s waste incineration power industry under FIT and RPS schemes, and provides a case study by using scenario analysis method. The model, on the one hand, not only clearly shows the complex logical relationship between the factors but also assesses policy effects of the two policy tools in the development of the industry. On the other hand, it provides a reference for scholars to study similar problems in different countries, thereby facilitating an understanding of waste incineration power’s long-term sustainable development pattern under FIT and RPS schemes, and helping to provide references for policy-making institutions. The results show that in the perfect competitive market, the implementation of RPS can promote long-term and rapid development of China’s waste incineration power industry given the constraints and actions of the mechanisms of RPS quota proportion, the TGC valid period, and fines, compared with FIT. At the end of the paper, policy implications are offered as references for the government.

The Development of the Renewable Energy Power Industry under Feed-In Tariff and Renewable Portfolio Standard: A Case Study of China’s Photovoltaic Power Industry

Among the regulatory policies, feed-in tariffs (FIT) and renewable portfolio standards (RPS) are the most popular to promote the development of renewable energy power industry. They can significantly contribute to the expansion of domestic industrial activities in terms of sustainable energy. In this paper, we synthetically consider various important factors with the analysis of the existing literature, and use system dynamics (SD) to establish models of long-term development of the renewable energy power industry under FIT and RPS schemes. The model not only clearly shows the complex logical relationship between the factors but also reveals the process of coordination between the two policy tools in the development of the renewable energy power industry. In addition, as an example of development of renewable energy industry, the paper studies the development of China’s photovoltaic power industry under different scenarios. The models proposed in this paper can provide a reference for scholars to study development of the renewable energy power industry in different countries, thereby facilitating an understanding of the renewable energy power’s long-term sustainable development pattern under FIT and RPS schemes, and helping to provide references for policy-making institutions. The results show that in the perfect competitive market, the implementation of RPS can promote long-term and rapid development of China’s photovoltaic power industry given the constraints and actions of the mechanisms of RPS quota proportion, the TGC valid period, and fines, compared with FIT. At the end of the paper, policy implications are offered as references for the government.

Investment timing under uncertain renewable energy policy: An empirical study of small hydropower projects

Policy uncertainty can be a powerful deterrent to immediate investments. Based on panel data of 214 licenses to construct small run-of-the-river hydropower plants, we examine whether the prospect of a common Swedish–Norwegian market for green certificates (i.e., a renewable portfolio standard scheme) affected the timing of investments. Our results show that traditional utilities and other professional investors in the energy market acted in accordance with a real options investment rule, and the prospect of possible future subsidies delayed their investment decision. On the other hand, our results do not show that farmers and other non-professional investors incorporated timing considerations in their investment decisions. Rather, our results indicate that these investors behaved as if their investment opportunity is now-or-never, investing if the project is profitable according to a net present value investment rule, ignoring the opportunity to create additional value by waiting. The observed difference in behavior between professional and non-professional investors is interesting given the distributed nature of many renewable energy technologies, and can help planners and policymakers better understand the forces shaping the future market for electricity.

The Structural Impact of Renewable Portfolio Standards and Feed-in-Tariffs on Electricity Markets

Renewable energy sources (RES) capacity has grown globally at a rapid rate benefiting from multiple support schemes such as renewable portfolio standards (RPS), feed-in-tariffs (FIT), and market premia (MP). While research concentrated on comparing the effectiveness of these policy instruments in driving RES investment, the focus is increasingly shifting towards assessments of the structural impact of these schemes on electricity markets. RES support schemes are continuously being assessed on how they help achieve the three main objectives of electricity policy, i.e., the affordability, reliability, and sustainability of electricity supply. In this work, we quantitatively compare RPS, FIT and MP schemes in these three dimensions by assessing their future impact on electricity prices, on generation portfolios and security of supply as well as on carbon emissions. We simulate the impact of all three support schemes using a long-term capacity expansion model with an hourly granularity for a time horizon of 60 years. We find that all support schemes increase RES penetration and thereby help reduce CO2 emissions. However, MP and FIT schemes can achieve these effects at lower cost, while RPS schemes deliver more robust results. Our findings provide insights to regulators, utilities and investors on the consequences of current regulation and possible alternatives.