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Renewable Energy Investment under Carbon Emission Regulations

Author

Listed:
  • Yuan Yuan

    (School of Energy and Safety, Anhui University of Science and Technology, Huainan 232001, China
    School of Economics and Management, Huainan Normal University, Huainan 232001, China)

  • Feng Cai

    (School of Energy and Safety, Anhui University of Science and Technology, Huainan 232001, China)

  • Lingling Yang

    (School of Energy and Safety, Anhui University of Science and Technology, Huainan 232001, China
    Department of Biotechnology, Hefei Technology College, Hefei 238000, China)

Abstract

This paper considers a risk-neutral energy supplier who operates an electricity plant in an uncertain demand market. To characterize the impact of carbon emission quota and emergency supply cost of coal electricity, we first consider four different cases, (1) traditional energy without carbon emission restriction; (2) traditional energy with carbon emission quota; (3) mixed energy (both traditional and renewable energy) without carbon emission restriction, and (4) mixed energy with carbon emission quota, to find the optimal renewable energy investment level and coal inventory mechanism for an energy supplier. Then, through the analysis we derive the resulting equilibriums: coal inventory for electricity generation and the investment of renewable energy capacity. By comparing the performances under different scenarios, we find that (a) renewable energy establishment can mitigate the depression of carbon emission constraint, (b) the energy supplier can obtain positive benefits from optimal mixed energy strategy if the additional emergency cost of traditional energy is not too high, and (c) the optimal renewable energy capacity level is decreasing in the carbon emission quota. Our numerical simulations imply that the impact of additional emergency cost to the profit difference between mixed energy strategy and traditional energy strategy is mediated by carbon emission quota.

Suggested Citation

  • Yuan Yuan & Feng Cai & Lingling Yang, 2020. "Renewable Energy Investment under Carbon Emission Regulations," Sustainability, MDPI, vol. 12(17), pages 1-15, August.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:17:p:6879-:d:403413
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    References listed on IDEAS

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