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Renewable Energy Investment under Carbon Emission Regulations

by 1,2, 1,* and 1,3
1
School of Energy and Safety, Anhui University of Science and Technology, Huainan 232001, China
2
School of Economics and Management, Huainan Normal University, Huainan 232001, China
3
Department of Biotechnology, Hefei Technology College, Hefei 238000, China
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(17), 6879; https://doi.org/10.3390/su12176879
Received: 4 July 2020 / Revised: 14 August 2020 / Accepted: 21 August 2020 / Published: 24 August 2020
(This article belongs to the Section Economic and Business Aspects of Sustainability)
This paper considers a risk-neutral energy supplier who operates an electricity plant in an uncertain demand market. To characterize the impact of carbon emission quota and emergency supply cost of coal electricity, we first consider four different cases, (1) traditional energy without carbon emission restriction; (2) traditional energy with carbon emission quota; (3) mixed energy (both traditional and renewable energy) without carbon emission restriction, and (4) mixed energy with carbon emission quota, to find the optimal renewable energy investment level and coal inventory mechanism for an energy supplier. Then, through the analysis we derive the resulting equilibriums: coal inventory for electricity generation and the investment of renewable energy capacity. By comparing the performances under different scenarios, we find that (a) renewable energy establishment can mitigate the depression of carbon emission constraint, (b) the energy supplier can obtain positive benefits from optimal mixed energy strategy if the additional emergency cost of traditional energy is not too high, and (c) the optimal renewable energy capacity level is decreasing in the carbon emission quota. Our numerical simulations imply that the impact of additional emergency cost to the profit difference between mixed energy strategy and traditional energy strategy is mediated by carbon emission quota. View Full-Text
Keywords: renewable energy; carbon emission regulations; capacity investment; emergency cost renewable energy; carbon emission regulations; capacity investment; emergency cost
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MDPI and ACS Style

Yuan, Y.; Cai, F.; Yang, L. Renewable Energy Investment under Carbon Emission Regulations. Sustainability 2020, 12, 6879. https://doi.org/10.3390/su12176879

AMA Style

Yuan Y, Cai F, Yang L. Renewable Energy Investment under Carbon Emission Regulations. Sustainability. 2020; 12(17):6879. https://doi.org/10.3390/su12176879

Chicago/Turabian Style

Yuan, Yuan, Feng Cai, and Lingling Yang. 2020. "Renewable Energy Investment under Carbon Emission Regulations" Sustainability 12, no. 17: 6879. https://doi.org/10.3390/su12176879

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