Impact of policy mix concerning renewable portfolio standards and emissions trading on electricity market.

Abstract Few studies of policy mix concerning renewable portfolio standards (RPS) and emissions trading (ET) investigate a scenario in which the retailer is required to comply with quota obligations. This paper focuses on the impact of RPS, with an ET counterpart, on the electricity market when RPS are imposed on the state grid companies. The evolution game is employed to model transactions between multiple buyers and multiple sellers. The results show that ET enhances the price competitiveness of electricity from renewable energy source (RES-E) and reduces power generating companies' profit at the same time. On the other hand, when the RPS level goes up, the state grid companies gain a windfall created by the difference between the lower wholesale price of thermal power and the unchanging retail price. The windfall will be used to pay for the increasing cost of supporting RES-E. Thus, the thermal power generating companies are confronted with the double cost when introducing ET and RPS, but the state grid companies do not pay for the cost of supporting RES-E. This paper appeals to the Chinese government for the assessment of policy effects from a policy mix perspective. Highlights • The evolution game is employed to model transactions between multiple sellers and multiple buyers. • The quota obligation imposed on the state grid company is studied. • Emissions trading hurts the renewable power generating companies' profit and enhances the price competitiveness of RES-E. • The state grid companies do not pay for the cost of supporting RES-E. • The thermal power generating companies bear both the cost of emissions trading and the cost of supporting RES-E. [ABSTRACT FROM AUTHOR]