Joint equilibrium analysis of electricity market with tradable green certificates

Renewable portfolio standard (RPS) and tradable green certificate (TGC) schemes are important mechanisms to promote the development of renewable energy. In order to investigate the impacts of RPS and TGC schemes on the electricity wholesale market competition, a joint equilibrium model considering the oligopolistic TGC market is proposed in the paper based on the oligopoly competition equilibrium theory. Therein all generation companies behave in accordance with cournot model in the wholesale market, while the renewable companies behave in accordance with supply function model in the TGC market. This model can be formulated as an equilibrium problem with equilibrium constraints (EPEC) and is solved by the nonlinear complementarity approach. The simulation results show that, when the RPS is relatively low, renewable companies tend to withhold some of TGCs to raise the TGC price. Nevertheless, when the RPS is relatively high, renewable companies have few TGCs to withhold, and they may choose to reduce their wholesale electricity output, so as to reduce the amount of TGCs and raise the TGC price. These strategic behaviors will raise the electricity market price, and have negative impacts on the market efficiency.