How will tradable green certificates affect electricity trading markets under renewable portfolio standards? A China perspective

Abstract

Renewable portfolio standards (RPS) are important guarantees to promote renewable energy (RE) consumption. The tradable green certificate (TGC) trading mechanism is a supporting mechanism of RPS, but the rate of TGC trading is low and there is a double-metering problem of RE consumption. With the introduction of new policies in China, we innovatively take the electricity-selling side as the subject of RE consumption responsibility and biomass-based electricity-generation (BEG) projects are considered to participate in TGC trading. To explore the interaction between the TGC market and the electricity market, this paper sets up a day-ahead spot market-trading structure combining both markets under RPS and establishes a market equilibrium model. The established model is solved and validated based on the particle swarm optimization algorithm and the profits of each market player under different influencing factors are analysed. The main conclusions are as follows. (i) The established market structure and model effectively solve the double-metering problem of RE consumption, making the TGC turnover rate reach 82.97 %, greatly improving the market efficiency. (ii) Increased demand for TGC will increase demand for RE electricity. The participation of BEG projects in the TGC market can effectively improve the profit of biomass-based electricity producers (BEPs), reduce the burden of government financial subsidies and will not affect the consumption of wind-based electricity and photovoltaic-based electricity. This will help promote the rapid development of China’s RE, especially the BEG industry. (iii) Among the influencing factors, the increase in renewable-energy consumption responsibility weight and the decrease in electricity-generation cost can increase the profit of BEPs. The decline in TGC price and subsidy price will reduce the profit of BEPs. Finally, we put forward policy recommendations for China’s RPS and TGC trading mechanism. This study can provide a reference for the construction of China’s TGC market and electricity market and the development of RE.