Wind energy use under electricity supply guarantee rates: The impact of two incentive policies

Governments have adopted various incentives to promote wind energy, with Renewable Portfolio Standards and Emissions Trading Systems being among the most widely used policies. This paper explores the effects of these two incentive policies in different stages of wind energy development. We construct a regional power system consisting of a power retailer, a thermal power supplier, and a wind power supplier, where the wind power supplier needs to meet a specific guaranteed supply rate. Our findings reveal that Renewable Portfolio Standards policies lead to a 50% increase in the share of wind energy use in the early stages of wind energy development, compared to a 25% increase under Emissions Trading Systems policies. However, as wind energy technologies advance, the proportion of wind energy procured under Renewable Portfolio Standards exceeds the quota value, resulting in the policy’s diminishing effectiveness in further promoting wind energy. Conversely, the boosting effect of Emissions Trading Systems policies grows with higher carbon trading prices but remains constrained when wind energy supply stability is low. We validate these insights using electricity data from U.S. states implementing Renewable Portfolio Standards and Emissions Trading Systems policies, demonstrating the nuanced roles these incentives play in shaping wind energy integration.