TITLE:
A Preliminary Investigation of the Optimal Percentage Requirement in an Electricity Market with Tradable Green Certificates
AUTHORS:
Kevin M. Currier, Susanne Rassouli-Currier
KEYWORDS:
Renewable Energy; Tradable Green Certificates; Percentage Requirement; Renewable Portfolio Standard
JOURNAL NAME:
Theoretical Economics Letters,
Vol.2 No.2,
May
24,
2012
ABSTRACT: Around the world, energy markets are being liberalized with the goal of achieving fully competitive markets while at-taining environmental policy objectives. This paper considers a system of Tradable Green Certificates (TGCs)—a mar-ket based regulatory instrument designed to promote electricity generation from renewable energy sources. In a TGC program, the principal policy instrument is the “percentage requirement” which stipulates the percentage of total elec-tricity generation that must be obtained from renewable sources. This paper provides a preliminary investigation of the socially optimal choice of the percentage requirement in a Cournot duopoly setting. The paper discusses the problem geometrically and considers some of the practical difficulties associated with the determination of the optimal percent-age requirement. Several important avenues for generalization of the results are also discussed.