IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v152y2025ics0140988325008710.html

Impacts of government subsidies and risk aversion on an electricity plant’s energy transition and the optimal electricity sales decisions under renewable electricity production uncertainty

Author

Listed:
  • Li, Danhu
  • Xu, Jiazhu
  • Liu, Shuyan
  • AL-Wesabi, Ibrahim

Abstract

The installed renewable energy capacity surpassed 50% of total electricity capacity in 2023, reflecting China’s transition to a low-carbon energy mix. This paper investigates the impacts of government subsidies for renewable electricity (GS) and a plant’s risk-averse attitude (RA) on the energy transition and the optimal electricity sales decisions under renewable electricity production uncertainty. The study finds that GS and RA respectively have positive and negative impacts on the energy transition and the optimal utility function with their combined impact being positive (negative) at low-level (high-level) RA. The impact on the electricity selling price yields two outcomes: (1) (low-price) GS and RA respectively have positive and negative impacts with their combined impact being positive (negative) at low-level (high-level) RA. (2) High-price GS, RA and their combined impact are negative with low-level (high-level) RA’s impact being less (greater) than high-price GS’s. The impact on the expected electricity generation yields four outcomes: (1) (low-price) GS and RA respectively have positive and negative impacts with their combined impact being the greatest positive; (2) high-price GS and RA respectively have positive and negative impacts with their combined impact being positive (negative) at low-level (high-level) RA; (3) (low-price) GS, RA and their combined impact are positive with low-level (high-level) RA’s impact being less (greater) than (low-price) GS’s; (4) High-price GS, RA and their combined impact are positive with high-price GS having the greatest impact. The results offer critical insights to support the government in advancing low-carbon transitions and guide the plant in strategic decision-making.

Suggested Citation

  • Li, Danhu & Xu, Jiazhu & Liu, Shuyan & AL-Wesabi, Ibrahim, 2025. "Impacts of government subsidies and risk aversion on an electricity plant’s energy transition and the optimal electricity sales decisions under renewable electricity production uncertainty," Energy Economics, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:eneeco:v:152:y:2025:i:c:s0140988325008710
    DOI: 10.1016/j.eneco.2025.109041
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988325008710
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2025.109041?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Niu, Baozhuang & Jin, Delong & Pu, Xujin, 2016. "Coordination of channel members’ efforts and utilities in contract farming operations," European Journal of Operational Research, Elsevier, vol. 255(3), pages 869-883.
    2. Roald, Line A. & Pozo, David & Papavasiliou, Anthony & Molzahn, Daniel K. & Kazempour, Jalal & Conejo, Antonio, 2023. "Power systems optimization under uncertainty: a review of methods and applications," LIDAM Reprints CORE 3257, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Liu, Zugang (Leo) & Anderson, Trisha D. & Cruz, Jose M., 2012. "Consumer environmental awareness and competition in two-stage supply chains," European Journal of Operational Research, Elsevier, vol. 218(3), pages 602-613.
    4. Gu, Yujiong & Xu, Jing & Chen, Dongchao & Wang, Zhong & Li, Qianqian, 2016. "Overall review of peak shaving for coal-fired power units in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 723-731.
    5. Garðarsdóttir, Stefanía Ó. & Göransson, Lisa & Normann, Fredrik & Johnsson, Filip, 2018. "Improving the flexibility of coal-fired power generators: Impact on the composition of a cost-optimal electricity system," Applied Energy, Elsevier, vol. 209(C), pages 277-289.
    6. Drücke, Jaqueline & Borsche, Michael & James, Paul & Kaspar, Frank & Pfeifroth, Uwe & Ahrens, Bodo & Trentmann, Jörg, 2021. "Climatological analysis of solar and wind energy in Germany using the Grosswetterlagen classification," Renewable Energy, Elsevier, vol. 164(C), pages 1254-1266.
    7. He, Yi & Guo, Su & Zhou, Jianxu & Wu, Feng & Huang, Jing & Pei, Huanjin, 2021. "The many-objective optimal design of renewable energy cogeneration system," Energy, Elsevier, vol. 234(C).
    8. Lin, Boqiang & Xie, Yongjing, 2024. "How feed-in-tariff subsidies affect renewable energy investments in China? New evidence from firm-level data," Energy, Elsevier, vol. 294(C).
    9. Zhang, Hongfu & Gao, Mingming & Fan, Haohao & Zhang, Kaiping & Zhang, Jiahui, 2022. "A dynamic model for supercritical once-through circulating fluidized bed boiler-turbine units," Energy, Elsevier, vol. 241(C).
    10. Liu, Mengqi & Cao, Erbao & Salifou, Coulibaly Kigbajah, 2016. "Pricing strategies of a dual-channel supply chain with risk aversion," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 90(C), pages 108-120.
    11. Fan, Zhi-Ping & Cai, Siqin & Guo, Dongliang & Xu, Bo, 2022. "Facing the uncertainty of renewable energy production: Production decisions of a power plant with different risk attitudes," Renewable Energy, Elsevier, vol. 199(C), pages 1237-1247.
    12. Kopiske, Jakob & Spieker, Sebastian & Tsatsaronis, George, 2017. "Value of power plant flexibility in power systems with high shares of variable renewables: A scenario outlook for Germany 2035," Energy, Elsevier, vol. 137(C), pages 823-833.
    13. Ji, Chun-Yi & Tan, Zi-Kai & Chen, Bin-Jia & Zhou, Ding-Ce & Qian, Wu-Yong, 2024. "The impact of environmental policies on renewable energy investment decisions in the power supply chain," Energy Policy, Elsevier, vol. 186(C).
    14. Lin, Boqiang & Xie, Yongjing, 2024. "The role of venture capital in determining the total factor productivity of renewable energy enterprises: In the context of government subsidy reduction," Energy Economics, Elsevier, vol. 132(C).
    15. Alolo, Mutaka & Azevedo, Alcino & El Kalak, Izidin, 2020. "The effect of the feed-in-system policy on renewable energy investments: Evidence from the EU countries," Energy Economics, Elsevier, vol. 92(C).
    16. Shang, Yuping & Sang, Shenghu & Tiwari, Aviral Kumar & Khan, Salahuddin & Zhao, Xin, 2024. "Impacts of renewable energy on climate risk: A global perspective for energy transition in a climate adaptation framework," Applied Energy, Elsevier, vol. 362(C).
    17. Wang, Hongshuai & Ouyang, Ziqu & Ding, Hongliang & Su, Kun & Zhang, Jinyang & Hu, Yujie, 2024. "Experimental study on the flexible peak shaving with pulverized coal self-preheating technology under load variability," Energy, Elsevier, vol. 289(C).
    18. Ou, Yinlin & Hsiao, Cody Yu-Ling & Chui, Chin Man, 2024. "How does the supply chain market respond to policy shocks? Evidence from solar photovoltaic sectors in China," Renewable Energy, Elsevier, vol. 232(C).
    19. Zhao, Qian & Su, Chi-Wei & Qin, Meng & Umar, Muhammad, 2023. "Is global renewable energy development a curse or blessing for economic growth? Evidence from China," Energy, Elsevier, vol. 285(C).
    20. Fan, Dian & Chen, Shaoqing, 2024. "No pain, no gain? Simulation of carbon reduction potential and socioeconomic effects of voluntary carbon trading in China during 2021–2060," Applied Energy, Elsevier, vol. 375(C).
    21. Zhang, Alex Hongliang & Sirin, Selahattin Murat & Fan, Conglai & Bu, Maoliang, 2022. "An analysis of the factors driving utility-scale solar PV investments in China: How effective was the feed-in tariff policy?," Energy Policy, Elsevier, vol. 167(C).
    22. Hossain, Mohammad Razib & Singh, Sanjeet & Sharma, Gagan Deep & Apostu, Simona-Andreea & Bansal, Pooja, 2023. "Overcoming the shock of energy depletion for energy policy? Tracing the missing link between energy depletion, renewable energy development and decarbonization in the USA," Energy Policy, Elsevier, vol. 174(C).
    23. Song, Huaixi & Li, Quanxi, 2024. "Decision-making in closed-loop supply chains: Effects of government subsidies and risk aversion," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    24. Chen, Wei & Luo, Jingjing & Govindan, Kannan & Bai, Chunguang & Quayson, Matthew, 2024. "Impact of carbon quota policy on clean energy investment strategies with financial constraints," International Journal of Production Economics, Elsevier, vol. 277(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cipolla, Gianfranco & Buonomano, Annamaria & Pernigotto, Giovanni & Gasparella, Andrea, 2026. "Energy flexibility strategies in urban areas: A sustainable energy consumption and production balance under a stochastic framework," Renewable and Sustainable Energy Reviews, Elsevier, vol. 230(C).
    2. Yuhua Liu & Qinggang Lyu & Zhengnan Gao & Shujun Zhu & Jinming Fu & Yongjiang Liu & Ming Gao & Zhen Chai, 2025. "A Modeling Study on the Impact of Coal Power in Wind–Solar–Thermal Storage System," Energies, MDPI, vol. 18(11), pages 1-16, May.
    3. Lei, Yifei & Botero, Hernan & Zhang, Riqi & Zhang, Junhao, 2025. "The impact of different environmental premium mechanisms on investment decisions in photovoltaic power generation projects: evidence from China," Energy, Elsevier, vol. 336(C).
    4. Gao, Zhi & Zhang, Zhihao, 2026. "A study on the policy synergy mechanism for the sustainable renewable energy transformation of Chinese power enterprise: An evolutionary game analysis based on CET, GC, and FIT," Renewable Energy, Elsevier, vol. 258(C).
    5. Habib, Md. Ahasan & Hossain, M.J., 2025. "Smart Grid, Smart FiT: A data-driven approach to optimize microgrid energy market," Energy Policy, Elsevier, vol. 203(C).
    6. Tao, Qihao & Lei, Xianliang & Hu, Yunsheng & Zhou, Xu, 2025. "Flow instability of 600 MW supercritical boiler water-cooled wall under low-load in deep peak-shaving process," Energy, Elsevier, vol. 333(C).
    7. Fangfang Guo & Tao Zhang & Xiuquan Huang & Yaoguang Zhong, 2023. "Government Subsidy Strategies Considering Greenness on Agricultural Product E-Commerce Supply Chain," Mathematics, MDPI, vol. 11(7), pages 1-26, March.
    8. Yuan, Rongsheng & Liu, Ming & Chen, Weixiong & Yan, Junjie, 2024. "Costs versus revenues of flexibility enhancement techniques for thermal power units in electricity-carbon joint markets," Energy, Elsevier, vol. 302(C).
    9. Di Wang & Qiyue Wu & Junyan Guo, 2025. "Research on Strategy Selection of Power Supply Chain Under Renewable Energy Consumption and Energy Storage Cost Sharing," Sustainability, MDPI, vol. 17(10), pages 1-28, May.
    10. Chen, Wenbo, 2018. "Retailer-driven carbon emission abatement with consumer environmental awareness and carbon tax: Revenue-sharing versus Cost-sharingAuthor-Name: Yang, Huixiao," Omega, Elsevier, vol. 78(C), pages 179-191.
    11. Lin, Boqiang & Xie, Yongjing, 2024. "How feed-in-tariff subsidies affect renewable energy investments in China? New evidence from firm-level data," Energy, Elsevier, vol. 294(C).
    12. Lingfan Xu & Ping Jiang, 2025. "Energy Policy Through a Gender Lens: The Impact of Wind Power Feed-In Tariff Policy on Female Employment," Sustainability, MDPI, vol. 17(10), pages 1-18, May.
    13. Luo, Yi-Lang & Li, Wen-Bo & Chen, Xuesheng, 2025. "Dynamic relationship between stock markets and renewable energy development: Evidence from cross-country data," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1262-1274.
    14. Chunning Na & Huan Pan & Yuhong Zhu & Jiahai Yuan & Lixia Ding & Jungang Yu, 2019. "The Flexible Operation of Coal Power and Its Renewable Integration Potential in China," Sustainability, MDPI, vol. 11(16), pages 1-17, August.
    15. Guo, Pu-hao & Wang, Xiang-qian & Meng, Xiang-rui, 2024. "Evolutionary game study and empirical analysis of the adoption of green coal mining technology: A case study of ITMDB," Energy, Elsevier, vol. 313(C).
    16. Zhang, Mingming & Guo, Qianxi & Liu, Liyun & Zhou, Dequn, 2025. "Renewable energy investment under the market-oriented transition of policies," Energy Policy, Elsevier, vol. 204(C).
    17. Wang, Yufei & Li, Zhengqi & Huang, Chunchao & Liu, Huacai & Feng, Yong & Du, Xinyuan, 2025. "Influence of central coal feed swirl combustion technology on wide-load range performance of burners, based on gas/particle flow characteristics," Energy, Elsevier, vol. 320(C).
    18. Azhgaliyeva, Dina & Le, Hai & Olivares, Resi Ong & Tian, Shu, 2024. "Renewable energy investments and feed-in tariffs: Firm-level evidence from Southeast Asia11An earlier version of the paper was presented at CUE2023," Applied Energy, Elsevier, vol. 374(C).
    19. Jun Zhao & Bo Shen, 2019. "The Strategies for Improving Energy Efficiency of Power System with Increasing Share of Wind Power in China," Energies, MDPI, vol. 12(12), pages 1-22, June.
    20. Gan, Lu & Xiong, Qian & Chen, Xiuyun & Lin, Zhiyi & Jiang, Wen, 2025. "Optimal dispatch schedule for the coordinated hydro-wind-photovoltaic system with non-priority output utilizing combined meta-heuristic," Omega, Elsevier, vol. 131(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:152:y:2025:i:c:s0140988325008710. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.