IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v295y2024ics0360544224008454.html
   My bibliography  Save this article

Optimal green investment strategy for grid-connected microgrid considering the impact of renewable energy source endowment and incentive policy

Author

Listed:
  • Long, Yong
  • Liu, Xia

Abstract

Microgrid is a promising way to integrate renewable distributed generation into the electric power sector, which has received widespread attention. In this paper, a uniform capacity-constrained optimization model under different power purchase and sale price contracts is developed to explore the optimal green investment strategy for grid-connected microgrid (GCM) with three configuration types. The impact of renewable energy source endowment and incentive policy is focused when macrogrid’s generators emit more pollution than GCM’s non-renewable generators, such as in China and India. The results show that: (1) GCM with renewable generation can only be invested in a site with relatively abundant renewable endowment; (2) carbon tax effectively promotes the deployment of GCM with renewable generation and achieves carbon emission abatement, but excessive carbon tax cannot incentive investment in the most desired GCM type; (3) a subsidy trap is found under feed-in tariff (FIT) subsidy, which implies that the fade-out or exit of FIT subsidy is beneficial for microgrid’s healthy development; (4) and the comparisons under different price contracts emphasize the importance of macrogrid providing non-discriminatory access to feed-in and feed-out services to microgrid.

Suggested Citation

  • Long, Yong & Liu, Xia, 2024. "Optimal green investment strategy for grid-connected microgrid considering the impact of renewable energy source endowment and incentive policy," Energy, Elsevier, vol. 295(C).
    • Handle: RePEc:eee:energy:v:295:y:2024:i:c:s0360544224008454
    DOI: 10.1016/j.energy.2024.131073
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544224008454
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2024.131073?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stadler, Michael & Cardoso, Gonçalo & Mashayekh, Salman & Forget, Thibault & DeForest, Nicholas & Agarwal, Ankit & Schönbein, Anna, 2016. "Value streams in microgrids: A literature review," Applied Energy, Elsevier, vol. 162(C), pages 980-989.
    2. Chengrong Pan & Yong Long, 2015. "Evolutionary Game Analysis of Cooperation between Microgrid and Conventional Grid," Mathematical Problems in Engineering, Hindawi, vol. 2015, pages 1-10, August.
    3. Sam Aflaki & Serguei Netessine, 2017. "Strategic Investment in Renewable Energy Sources: The Effect of Supply Intermittency," Manufacturing & Service Operations Management, INFORMS, vol. 19(3), pages 489-507, July.
    4. Li, Longxi & Cao, Xilin, 2022. "Comprehensive effectiveness assessment of energy storage incentive mechanisms for PV-ESS projects based on compound real options," Energy, Elsevier, vol. 239(PA).
    5. Xiang, Yue & Cai, Hanhu & Liu, Junyong & Zhang, Xin, 2021. "Techno-economic design of energy systems for airport electrification: A hydrogen-solar-storage integrated microgrid solution," Applied Energy, Elsevier, vol. 283(C).
    6. Williams, Nathaniel J. & Jaramillo, Paulina & Taneja, Jay & Ustun, Taha Selim, 2015. "Enabling private sector investment in microgrid-based rural electrification in developing countries: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1268-1281.
    7. Ambec, Stefan & Crampes, Claude, 2012. "Electricity provision with intermittent sources of energy," Resource and Energy Economics, Elsevier, vol. 34(3), pages 319-336.
    8. Bullich-Massagué, Eduard & Díaz-González, Francisco & Aragüés-Peñalba, Mònica & Girbau-Llistuella, Francesc & Olivella-Rosell, Pol & Sumper, Andreas, 2018. "Microgrid clustering architectures," Applied Energy, Elsevier, vol. 212(C), pages 340-361.
    9. Ambec, Stefan & Crampes, Claude, 2021. "Real-time electricity pricing to balance green energy intermittency," Energy Economics, Elsevier, vol. 94(C).
    10. Wen-Hsien Tsai & Chih-Hao Yang & Cheng-Tsu Huang & Yen-Ying Wu, 2017. "The impact of the carbon tax policy on green building strategy," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 60(8), pages 1412-1438, August.
    11. Soshinskaya, Mariya & Crijns-Graus, Wina H.J. & Guerrero, Josep M. & Vasquez, Juan C., 2014. "Microgrids: Experiences, barriers and success factors," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 659-672.
    12. Stefan Ambec & Claude Crampes, 2019. "Decarbonizing Electricity Generation with Intermittent Sources of Energy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1105-1134.
    13. Milis, Kevin & Peremans, Herbert & Van Passel, Steven, 2018. "The impact of policy on microgrid economics: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 3111-3119.
    14. Yu, Nan & Kang, Jin-Su & Chang, Chung-Chuan & Lee, Tai-Yong & Lee, Dong-Yup, 2016. "Robust economic optimization and environmental policy analysis for microgrid planning: An application to Taichung Industrial Park, Taiwan," Energy, Elsevier, vol. 113(C), pages 671-682.
    15. Yu, L. & Li, Y.P. & Huang, G.H., 2019. "Planning municipal-scale mixed energy system for stimulating renewable energy under multiple uncertainties - The City of Qingdao in Shandong Province, China," Energy, Elsevier, vol. 166(C), pages 1120-1133.
    16. Amjad Ali & Wuhua Li & Rashid Hussain & Xiangning He & Barry W. Williams & Abdul Hameed Memon, 2017. "Overview of Current Microgrid Policies, Incentives and Barriers in the European Union, United States and China," Sustainability, MDPI, vol. 9(7), pages 1-28, June.
    17. Haghi, Ehsan & Raahemifar, Kaamran & Fowler, Michael, 2018. "Investigating the effect of renewable energy incentives and hydrogen storage on advantages of stakeholders in a microgrid," Energy Policy, Elsevier, vol. 113(C), pages 206-222.
    18. Chen, Weidong & Wei, Pengbang, 2018. "Socially optimal deployment strategy and incentive policy for solar photovoltaic community microgrid: A case of China," Energy Policy, Elsevier, vol. 116(C), pages 86-94.
    19. Delarue, Erik & Van den Bergh, Kenneth, 2016. "Carbon mitigation in the electric power sector under cap-and-trade and renewables policies," Energy Policy, Elsevier, vol. 92(C), pages 34-44.
    20. Mehleri, E.D. & Sarimveis, H. & Markatos, N.C. & Papageorgiou, L.G., 2013. "Optimal design and operation of distributed energy systems: Application to Greek residential sector," Renewable Energy, Elsevier, vol. 51(C), pages 331-342.
    21. Chen, Weidong & Zeng, Yu & Xu, Chongqing, 2019. "Energy storage subsidy estimation for microgrid: A real option game-theoretic approach," Applied Energy, Elsevier, vol. 239(C), pages 373-382.
    22. Stefano Moroni & Luca Tricarico, 2018. "Distributed energy production in a polycentric scenario: policy reforms and community management," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 61(11), pages 1973-1993, September.
    23. M. A. C. L. Gunarathna & R. J. Yang & A. Song, 2022. "Diverse distributed renewable energy trading paradigms: a business model review," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 65(1), pages 1-36, January.
    24. Neetzow, Paul & Pechan, Anna & Eisenack, Klaus, 2018. "Electricity storage and transmission: Complements or substitutes?," Energy Economics, Elsevier, vol. 76(C), pages 367-377.
    25. Ajaz, Warda & Bernell, David, 2021. "Microgrids and the transition toward decentralized energy systems in the United States: A Multi-Level Perspective," Energy Policy, Elsevier, vol. 149(C).
    26. Thomas Sachs & Anna Gründler & Milos Rusic & Gilbert Fridgen, 2019. "Framing Microgrid Design from a Business and Information Systems Engineering Perspective," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 61(6), pages 729-744, December.
    27. Helm, Carsten & Mier, Mathias, 2019. "On the efficient market diffusion of intermittent renewable energies," Energy Economics, Elsevier, vol. 80(C), pages 812-830.
    28. Yong Long & Yu Wang & Chengrong Pan, 2018. "Incentive Mechanism of Micro-grid Project Development," Sustainability, MDPI, vol. 10(1), pages 1-19, January.
    29. Yong Long & Chengrong Pan & Yu Wang, 2018. "Research on a Microgrid Subsidy Strategy Based on Operational Efficiency of the Industry Chain," Sustainability, MDPI, vol. 10(5), pages 1-26, May.
    30. Yang, Xiaolei & He, Lingyun & Xia, Yufei & Chen, Yufeng, 2019. "Effect of government subsidies on renewable energy investments: The threshold effect," Energy Policy, Elsevier, vol. 132(C), pages 156-166.
    31. Akulker, Handan & Aydin, Erdal, 2023. "Optimal design and operation of a multi-energy microgrid using mixed-integer nonlinear programming: Impact of carbon cap and trade system and taxing on equipment selections," Applied Energy, Elsevier, vol. 330(PA).
    32. Nicolini, Marcella & Tavoni, Massimo, 2017. "Are renewable energy subsidies effective? Evidence from Europe," Renewable and Sustainable Energy Reviews, Elsevier, vol. 74(C), pages 412-423.
    33. A. Gürhan Kök & Kevin Shang & Şafak Yücel, 2018. "Impact of Electricity Pricing Policies on Renewable Energy Investments and Carbon Emissions," Management Science, INFORMS, vol. 64(1), pages 131-148, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pablo Benalcazar & Adam Suski & Jacek Kamiński, 2020. "The Effects of Capital and Energy Subsidies on the Optimal Design of Microgrid Systems," Energies, MDPI, vol. 13(4), pages 1-23, February.
    2. Deng Xu & Yong Long, 2019. "The Impact of Government Subsidy on Renewable Microgrid Investment Considering Double Externalities," Sustainability, MDPI, vol. 11(11), pages 1-15, June.
    3. Ambec, Stefan & Yang, Yuting, 2024. "Climate policy with electricity trade," Resource and Energy Economics, Elsevier, vol. 76(C).
    4. Neetzow, Paul, 2021. "The effects of power system flexibility on the efficient transition to renewable generation," Applied Energy, Elsevier, vol. 283(C).
    5. Antoine Boche & Clément Foucher & Luiz Fernando Lavado Villa, 2022. "Understanding Microgrid Sustainability: A Systemic and Comprehensive Review," Energies, MDPI, vol. 15(8), pages 1-29, April.
    6. Norouzi, Farshid & Hoppe, Thomas & Elizondo, Laura Ramirez & Bauer, Pavol, 2022. "A review of socio-technical barriers to Smart Microgrid development," Renewable and Sustainable Energy Reviews, Elsevier, vol. 167(C).
    7. Alexander Haupt, 2023. "Environmental Policy and Renewable Energy in an Imperfectly Competitive Market," CESifo Working Paper Series 10524, CESifo.
    8. Carsten Helm & Mathias Mier, 2020. "Steering the Energy Transition in a World of Intermittent Electricity Supply: Optimal Subsidies and Taxes for Renewables Storage," ifo Working Paper Series 330, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    9. Yang, Yuting, 2022. "Electricity interconnection with intermittent renewables," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    10. Younes Zahraoui & Ibrahim Alhamrouni & Saad Mekhilef & M. Reyasudin Basir Khan & Mehdi Seyedmahmoudian & Alex Stojcevski & Ben Horan, 2021. "Energy Management System in Microgrids: A Comprehensive Review," Sustainability, MDPI, vol. 13(19), pages 1-33, September.
    11. Ambec, Stefan & Crampes, Claude, 2021. "Real-time electricity pricing to balance green energy intermittency," Energy Economics, Elsevier, vol. 94(C).
    12. Lenhart, Stephanie & Araújo, Kathleen, 2021. "Microgrid decision-making by public power utilities in the United States: A critical assessment of adoption and technological profiles," Renewable and Sustainable Energy Reviews, Elsevier, vol. 139(C).
    13. Pommeret, Aude & Schubert, Katheline, 2022. "Optimal energy transition with variable and intermittent renewable electricity generation," Journal of Economic Dynamics and Control, Elsevier, vol. 134(C).
    14. Nandeeta Neerunjun & Hubert Stahn, 2023. "Renewable energy support: pre-announced policies and (in)-efficiency," AMSE Working Papers 2335, Aix-Marseille School of Economics, France.
    15. Milis, Kevin & Peremans, Herbert & Van Passel, Steven, 2018. "Steering the adoption of battery storage through electricity tariff design," Renewable and Sustainable Energy Reviews, Elsevier, vol. 98(C), pages 125-139.
    16. Min Song & Yu Wang & Yong Long, 2022. "Investment and Production Strategies of Renewable Energy Power under the Quota and Green Power Certificate System," Energies, MDPI, vol. 15(11), pages 1-24, June.
    17. Chen, Weidong & Zeng, Yu & Xu, Chongqing, 2019. "Energy storage subsidy estimation for microgrid: A real option game-theoretic approach," Applied Energy, Elsevier, vol. 239(C), pages 373-382.
    18. Helm, Carsten & Mier, Mathias, 2021. "Steering the energy transition in a world of intermittent electricity supply: Optimal subsidies and taxes for renewables and storage," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    19. Miguel Carpintero-Rentería & David Santos-Martín & Josep M. Guerrero, 2019. "Microgrids Literature Review through a Layers Structure," Energies, MDPI, vol. 12(22), pages 1-22, November.
    20. Yang, Yuting, 2020. "Electricity Interconnection with Intermittent Renewables," TSE Working Papers 20-1075, Toulouse School of Economics (TSE).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:295:y:2024:i:c:s0360544224008454. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.