On the impact of FIT policies on renewable energy investment: Based on the solar power support policies in China’s power market

Highlights

Modeling of four FIT policy schemes with intermittent resources.

Formulating a two-stage decision model with a characteristic closed-loop game in the spot market structure.

Analyzing the effects of the CFCC policy on renewable energy investment.

Demonstrating that CFCC policy is a robust policy in the electricity spot market.

Abstract

In 2013, the feed-in tariff (FIT) policy was issued in China to promote the investment in renewable technology, but then it was revised because this policy brought a heavy financial burden to the government. By considering the intermittence of renewable resources, we model the implemented Chinese FIT policies and analyze their impact on renewable energy investment in the power market. The open-loop model is employed to simulate the China’s power market organized with Power Purchase Agreement, and the closed-loop game is used to characterize the spot power market. Meanwhile, the strategic capacity choices of power generators in two games are compared under four different policy schemes: (i) free competition, (ii) FIT via fixed subsidy, (iii) FIT via price premium and (iv) Chinese FIT by cross control (CFCC). The results show that the CFCC policy is a good alternative to well control the investment in renewable technology, as it can be seen as a comprise between free competition and FIT via fixed subsidy policy. Furthermore, compared with the other three policy schemes, the CFCC policy is capable of keeping renewable power generators from deviating the equilibrium, which implies higher robustness in regulating the electricity spot market.

Keywords

  • The FIT policy;
  • Power market;
  • Open-loop game;
  • Closed-loop game;
  • Investment capacity;
  • Renewable technology

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