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The quest for carbon-neutral industrial operations: renewable power purchase versus distributed generation

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  • Tongdan Jin
  • Tianqin Shi
  • Taeho Park

Abstract

Integrating renewable energy into the manufacturing facility is the ultimate key to realising carbon-neutral operations. Although many firms have taken various initiatives to reduce the carbon footprint of their facilities, there are few quantitative studies focused on cost analysis and supply reliability of integrating intermittent wind and solar power. This paper aims to fill this gap by addressing the following question: shall we adopt power purchase agreement (PPA) or onsite renewable generation to realise the eco-economic benefits? We tackle this complex decision-making problem by considering two regulatory options: government carbon incentives and utility pricing policy. A stochastic programming model is formulated to search for the optimal mix of onsite and offsite renewable power supply. The model is tested extensively in different regions under various climatic conditions. Three findings are obtained. First, in a long term onsite generation and PPA can avoid the price volatility in the spot or wholesale electricity market. Second, at locations where the wind speed is below 6 m/s, PPA at $70/MWh is preferred over onsite wind generation. Third, compared to PPA and wind generation, solar generation is not economically competitive unless the capacity cost is down below $1.5 M/MW.

Suggested Citation

  • Tongdan Jin & Tianqin Shi & Taeho Park, 2018. "The quest for carbon-neutral industrial operations: renewable power purchase versus distributed generation," International Journal of Production Research, Taylor & Francis Journals, vol. 56(17), pages 5723-5735, September.
    • Handle: RePEc:taf:tprsxx:v:56:y:2018:i:17:p:5723-5735
    DOI: 10.1080/00207543.2017.1394593
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    Cited by:

    1. Osama A. Marzouk, 2023. "Zero Carbon Ready Metrics for a Single-Family Home in the Sultanate of Oman Based on EDGE Certification System for Green Buildings," Sustainability, MDPI, vol. 15(18), pages 1-25, September.
    2. Liu, Jicheng & Lu, Yunyuan, 2022. "Research on the evaluation of China's photovoltaic policy driving ability under the background of carbon neutrality," Energy, Elsevier, vol. 250(C).
    3. Davis-Sramek, Beth, 2021. "Corporate “green gold”: State policy implications for wind and solar energy buyers," Business Horizons, Elsevier, vol. 64(3), pages 347-360.
    4. Chung-Hao Chang & Shih-Fang Lo, 2022. "Impact Analysis of a National and Corporate Carbon Emission Reduction Target on Renewable Electricity Use: A Review," Energies, MDPI, vol. 15(5), pages 1-18, February.
    5. Heloísa P. Burin & Julio S. M. Siluk & Graciele Rediske & Carmen B. Rosa, 2020. "Determining Factors and Scenarios of Influence on Consumer Migration from the Regulated Market to the Deregulated Electricity Market," Energies, MDPI, vol. 14(1), pages 1-18, December.
    6. Wang, Fengjuan & Lv, Chengwei, 2024. "A data center expansion scheme considering net-zero carbon operation: Optimization of geographical location, on-site renewable utilization and green certificate purchase," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).

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