Equilibrium model of the impact of renewable portfolio standards and tradable green certificates on China's power supply chain

Abstract

The global shift toward renewable energy has gained momentum as nations strive to address environmental challenges and ensure energy security, with policies such as the Renewable Portfolio Standards (RPSs) and Tradable Green Certificates (TGCs) playing pivotal roles. This study develops a power supply chain network (PSCN) equilibrium model that incorporates variations in renewable energy targets to examine the complex dynamics of how PSCNs are influenced by RPS and TGC policies. The findings reveal that although increasing installed capacity supports greater renewable power consumption within the power mix, the efficiency of this growth is limited, and relying solely on capacity expansion is not a cost-effective strategy. We show that well-calibrated RPSs can effectively boost power generation from renewable energy resources (REPs) and enhance environmental benefits within PSCNs. However, higher RPS targets may reduce the overall profitability of PSCNs, though they contribute positively to environmental improvements. Notably, the social benefits of the supply chain follow a U-shaped pattern as RPS targets, suggesting that determining an optimal target is crucial for maximizing social welfare. Our study highlights the importance of integrating TGC transactions into China's power market under RPSs and the need for proactive policy design to optimize social outcomes and promote REP growth.