242 / 2024-04-23 19:39:37

Addressing the Reliability Challenge: Subsidy Policies for Promoting Renewable Electricity Consumption

Government Subsidy,renewable energy

The intermittency and volatility of renewable electricity poses a challenge to the supply reliability, which is not conducive to the consumption of renewable electricity. To ensure reliable electricity supply, more governments implement subsidy policies to promote the adoption of innovative technologies by renewable energy producers to improve the supply reliability. We compare two types of subsidies provided by a government. First, we show that without government intervention, customers' low green consciousness or higher improvement cost may prevent the renewable energy producer to enhance the supply reliability. Second, through a comprehensive comparison, we find that both subsidy policies can incentivize the renewable energy producer to improve the supply reliability when customers are more green-conscious and the improvement cost is high. However, the OS policy and the IS policy operate on different mechanisms: the IS policy can directly alleviate the improvement cost burden on the renewable energy producer, while the OS policy serves a dual role of increasing the renewable energy producer's marginal operational profit and expanding the market demand for renewable electricity. When customers' green consciousness is low, the government can only choose whether or not to implement the OS policy.