Research On Market Power Of Electricity Generators And Its Impact Under The Mechanism Of Tradable Green Certificates

Because of the difficulties for integrating to the grid, the renewable electricity is idle and wasted, the12th Five-year Plan put forward Renewable Portfolio Standards (RPS) recently. RPS is beneficial to realize the large scale development of renewable energy as it introduces market competition to the power industry. RPS encourages and supports renewable generation enterprises to participate in market competition by tradable green certificates(TGCs), it converts the negative externalities of thermal generation to be internalized, gradually changes the unreasonable power generation structure to promote the development of renewable energy power generation industry and the low carbon development of China’s power industry.This thesis focuses on the market power and its effect on the electricity market. Firstly, we introduce the relative theories of RPS and TGCs. Then we analyze the interactions between green certificates and power market, an optimization model is established according to partial equilibrium theory to analyze the price and volume effects of green certificate. Finally, we discuss the existence of market power under TGCs, and we establish a mathematical model and use Matlab software to simulate its influence on power market and get some empirical results.The conclusions are as follows. The price paid by consumer improves with the increase of the quota a in all kinds of market structure, but price raises more greatly when nonrenewable generators possess market power compared to the situation when renewable generators have market power. The certificate price will increase as the quota a increases when green generators are dominant firm with market power; however, the nonrenewable firms have a strong incentive to lower the certificate price when it dominates the market with its market power for avoiding the costs from buying TGCs. The lower certificate price would lead to an underinvestment in renewable in the long run as subsidies of renewable firms received by selling TGCs disappear. Therefore, government needs to supervise the market to ensure a healthy development of renewable industry under the RPS and TGCs.