An inter-provincial transfer fee model under renewable portfolio standard policy

The reverse distribution of renewable energy-rich regions and high energy-consumption regions hinders further implementation of the territorial management model (TMM) under Renewable Portfolio Standard (RPS) in China. To overcome this hindrance, this study creatively proposes an inter-provincial transfer fee model (ITFM) which can integrate the different advantages of each province to improve the RPS. In the ITFM, the central government is the leader and aims to optimize the national renewable energy development cost; the 31 provincial governments are the followers and attempt to minimize the RPS targets realization cost. We applied Stackelberg Game to analyze the Nash equilibrium, established a bi-level programming model combined with optimization theory, and used Karush–Kuhn–Tucker condition to solve the model scientifically. The case study of Tianjin, Shandong, Hebei, and Inner Mongolia shows that the costs of all the four provincial regions under the ITFM are reduced, and the total cost is reduced by 72.98×108 CNY, 12.27%. A sensitivity analysis certifies the robustness of the model. The results prove that the ITFM can provide a flexible and efficient way for all the provinces, and fully exploit renewable energy in the whole country. Therefore, we propose some policy recommendations for the implementation of the ITFM.