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Renewable Portfolio Standards in the Presence of Green Consumers and Emissions Trading

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  • Yihsu Chen
  • Lizhi Wang

Abstract

Greenhouse gas (GHG) emissions trading, green pricing programs and renewable portfolio standards (RPS) are three concurrent policies implemented in the United States to reduce reliance on fossil fuel and GHG emissions. Despite their differences in policy targets, they are closely related and integrated with competitive electric markets. This paper examines the interactions among these three policies by considering two aspects of the RPS policy design: double-counting and bundling. Whereas the former grants utilities using the same MWh of renewable energy to meet RPS and to sell as green power, the latter allows them to bundle the renewable energy credits/certificates (RECs) with non-renewable electricity and sell as green power. This paper studies the policy designs by formulating each policy combination as a market model, which treats electricity as a differentiated product. We derive the conditions under which the REC price serves as the upper bound of the green premium or vice versa. The theoretical analysis shows that the bundling could be redundant in the presence of double counting. The policies that allow for double-counting appear to be a better choice, since they result in a higher social surplus. Most surplus gains are due to consumers surplus from green power sales. The framework we develop in this paper is capable of incorporating other detailed policy designs in the analysis such as strategic reserve and offset. Copyright Springer Science+Business Media, LLC 2013

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  • Yihsu Chen & Lizhi Wang, 2013. "Renewable Portfolio Standards in the Presence of Green Consumers and Emissions Trading," Networks and Spatial Economics, Springer, vol. 13(2), pages 149-181, June.
    • Handle: RePEc:kap:netspa:v:13:y:2013:i:2:p:149-181
    DOI: 10.1007/s11067-012-9176-0
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    1. Munoz, Francisco D. & Pumarino, Bruno J. & Salas, Ignacio A., 2017. "Aiming low and achieving it: A long-term analysis of a renewable policy in Chile," Energy Economics, Elsevier, vol. 65(C), pages 304-314.
    2. Assembayeva, Makpal & Egerer, Jonas & Mendelevitch, Roman & Zhakiyev, Nurkhat, 2018. "A spatial electricity market model for the power system: The Kazakhstan case study," Energy, Elsevier, vol. 149(C), pages 762-778.
    3. Gottschamer, L. & Zhang, Q., 2016. "Interactions of factors impacting implementation and sustainability of renewable energy sourced electricity," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 164-174.
    4. Siddiqui, Afzal S. & Tanaka, Makoto & Chen, Yihsu, 2016. "Are targets for renewable portfolio standards too low? The impact of market structure on energy policy," European Journal of Operational Research, Elsevier, vol. 250(1), pages 328-341.
    5. Leilei Zhang & Guping Hu & Lizhi Wang & Yihsu Chen, 2016. "A bottom-up biofuel market equilibrium model for policy analysis," Annals of Operations Research, Springer, vol. 236(1), pages 75-101, January.
    6. Zhou, Shan & Solomon, Barry D., 2021. "The interplay between renewable portfolio standards and voluntary green power markets in the United States," Renewable Energy, Elsevier, vol. 178(C), pages 720-729.
    7. repec:diw:diwwpp:dp1659 is not listed on IDEAS
    8. Rocha, Paula & Kaut, Michal & Siddiqui, Afzal S., 2016. "Energy-efficient building retrofits: An assessment of regulatory proposals under uncertainty," Energy, Elsevier, vol. 101(C), pages 278-287.
    9. repec:diw:diwwpp:dp1521 is not listed on IDEAS
    10. Leilei Zhang & Guping Hu & Lizhi Wang & Yihsu Chen, 2016. "A bottom-up biofuel market equilibrium model for policy analysis," Annals of Operations Research, Springer, vol. 236(1), pages 75-101, January.
    11. Zhang, Qi & Wang, Ge & Li, Yan & Li, Hailong & McLellan, Benjamin & Chen, Siyuan, 2018. "Substitution effect of renewable portfolio standards and renewable energy certificate trading for feed-in tariff," Applied Energy, Elsevier, vol. 227(C), pages 426-435.
    12. Wang, Ge & Zhang, Qi & Li, Yan & Mclellan, Benjamin C. & Pan, Xunzhang, 2019. "Corrective regulations on renewable energy certificates trading: Pursuing an equity-efficiency trade-off," Energy Economics, Elsevier, vol. 80(C), pages 970-982.
    13. Tanaka, Makoto & Chen, Yihsu, 2013. "Market power in renewable portfolio standards," Energy Economics, Elsevier, vol. 39(C), pages 187-196.

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