The Renewable Portfolio Standard And Economic Performance

In the process of promoting the development of renewable electricity industry, it is urgent to overcome the three obstacles, which are power generation, accessing to grid and its consumption in the market. However, it is impossible to overcome the three obstacles rely only on cost advantages and technical progress. Significant institutional innovation must be conducted. In order to advance the development of renewable energy industry, overcome the three obstacles and achieve the goal of non-fossil energy accounting for 15% or 20% of the total primary energy consumption in 2020 or 2030 respectively, China will gradually promote the construction of Renewable Portfolio Standards (RPS) and Tradable Green Certificates System (TGCs) in the near future.Under this background, this thesis reviews the literatures and research results at home and abroad and focuses on the mechanism and effect of RPS acting on economic performance. Firstly, according to some theories such as institutional change, property-rights, transaction cost and economic performance, this thesis gives the economic interpretation of RPS. The system framework and operation machanisms of RPS are introduced suitable for the situation of China. Secondly, the economic effects of RPS are analyzed, and the mechanism is discussed of RPS acting on economic performance based on system dynamics. Then, considering the relationship of coal power producers and renewable power producers and the interaction effect of electricity market and TGC market, the model is discussed of RPS acting on economic performance based on game theory, and the horizontal integration and revenue sharing contract mechanisms of power producers are studied. Finally, based on China’s empirical data, this thesis simulates the effect of RPS acting on economic performance by adopting MATLAB software.The conclusions are as follows. Firstly, RPS could realize the institutional change from fiscal subsidies of Feed-in-tarriff to the combined action of policy and market of RPS. The tradable green certificates are forced to be considered as economic goods under RPS, and the ownership and usage rights of tradable green certificates are allocated to renewable power producers. So, the tradable green certificate becomes a kind of property rights. Because of the existence of transaction costs and the explicit definition and allocation of ownership and usage rights, the transaction of tradable green certificates will affect the market resource allocation. Secondly, based on China’s empirical data, the upper and lower limit of quota should be set at (6.897%,39.300%). Thirdly, with the government improving quota proportion, renewable power production will increase, coal power production will decrease, total power supply will increase, the electricity price will decrease, certificate price will increase, trading quantity of certificates will increase, the profit of coal power producer will decrease, the profit of renewable power producer will increase, the producer surplus will decrease, the consumer surplus will increase, and social welfare level will decrease. Fourthly, the total profits of power producers after collusion are higher than the total profits of power producers when no collusion is established, and the shares of profits of coal power producers and renewable power producers after collusion are higher than the shares of profits when no collusion is established. Thus, the power producers have the tendency to integration to realize revenue sharing. However, the collusion of power producers will make the total power supply much fewer, the electricity price higher, social welfare level lower, and the market failure of TGC market makes the certificate price not decided by supply and demand. With the government improving quota proportion, total power supply will increase, the electricity price will increase and social welfare level will decrease. The normal operation of electricity market is affected. Thus, the government should prevent the possible collusion in the system design and punish the collusion between coal power producers and renewable power producers.