Journal of Cleaner Production 213 (2019) 1274e1289

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Journal of Cleaner Production

journal homepage: www.elsevier.com/locate/jclepro

From feed-in tariff to renewable portfolio standards: An evolutionary

game theory perspective
Zuo Yi a, b, Zhao Xin-gang a, b, *, Zhang Yu-zhuo a, b, Zhou Ying a
a
School of Economics and Management, North China Electric Power University, Changping, Beijing, 102206, China
b
Beijing Key Laboratory of New Energy and Low-Carbon Development (North China Electric Power University), Changping, Beijing, 102206, China

a r t i c l e i n f o a b s t r a c t

Article history: China is experiencing renewable energy support schemes evolution from feed-in tariff (FIT) to renewable
Received 22 August 2018 portfolio standards (RPS) scheme, which can be significantly influenced by renewable and conventional
Received in revised form electricity producers strategies. This paper applies evolutionary game theory and system dynamics (SD)
29 October 2018
model to examine electricity producers strategies in this scheme context. We utilize the data from
Accepted 16 December 2018
Available online 20 December 2018
Chinese wind power industry for simulation to represent evolution of strategies, and research impacts of
scheme parameters (subsidy, quota, and fine) on electricity producers and tradable green certificate
(TGC) market operation. The results show that, to ensure all the electricity producers willing to trade
Keywords:
Feed-in tariff
TGC, scheme parameters should be within a reasonable range. Moreover, the stage descent mode of
Renewable portfolio standards subsidy and higher level of fine will help the electricity producers accept the RPS scheme as soon as
Evolutionary game theory possible and promote the scale of TGC transaction, but the quota requirement should be avoided too low.
System dynamics At the end of the paper, policy implications are offered as references for the government.
Behavior strategy © 2019 Elsevier Ltd. All rights reserved.
Tradable green certificate

1. Introduction The government adjust renewable energy schemes based on the

1.1. Background
Many countries have implemented a series of policies to expand
the market share of renewable electricity and encourage renewable
energy industry development (Kern et al., 2017). Two popular
support schemes for renewable electricity are price-based feed-in
tariff (FIT)1 scheme and market-based renewable portfolio stan-
dards (RPS) scheme (Kwon, 2015a,b). The FIT scheme represented
by Germany, Denmark, and Spain, set fixed prices or price premium
over the market price of electricity for a specified time period

(García-Alvarez et al., 2017). The RPS scheme employed by UK, US,
and Australia obligates electricity producers to acquire a certain
percentage of renewable electricity. Tradable green certificates
(TGCs) are issued for all renewable electricity produced. Thus,
electricity producers can fulfill their quota requirement by pro-
ducing it themselves or by purchasing TGCs from other renewable
producers (Pineda et al., 2016).
* Corresponding author. North China Electric Power University, No.2, Beinong
Road, Changping District, Beijing 102206, China.
E-mail address: 50601500@ncepu.edu.cn (Z. Xin-gang).
1
All the abbreviations in this paper are shown in Appendix A.
effectiveness of scheme implementation and changes in the inter-
nal or external environment, such as energy system reform and
economic development. At present, renewable electricity produc-
tion in China is supported by the FIT scheme. Under the scheme,
renewable energy technology has been updating, the costs
continue to decline, and renewable energy installed capacity has
increased significantly. China's total wind energy installed capacity
ranked first in the world by 2010, surpassing that of the United
States (Zhao et al., 2012). However, the implementation of FIT
scheme has also brought some problems. On the one hand, the
portion of FIT higher than market price comes from Renewable
Energy Development Fund built by government, which have
created great financial burden on the government (Zhang et al.,
2017). According to BJX (2016), the financing gap of Renewable
Energy Development Fund have reached 55 billion yuan, which
limits further development of renewable energy. On the other
hand, China is undergoing electric power system reform, where
electricity prices mechanism will change from fixed price mecha-
nism to market-based price formation mechanism, so the original
benchmark tariff based subsidies need to be adjusted. To alleviate
the lack of tariff surcharge subsidies and adapt to the market-based
price mechanism, Chinese government issued Notice on Trial
Implementation of Renewable Energy Green Tradable Certificate

https://doi.org/10.1016/j.jclepro.2018.12.170
0959-6526/© 2019 Elsevier Ltd. All rights reserved.
 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289
Issuance and Voluntary Subscription transaction System, which aims
to promote the implementation of the RPS scheme in China and
establish TGC transaction market. According to Chinese govern-
ment plan and some researches (BJX, 2014; Zhang et al., 2017), the
FIT scheme will be replaced by RPS scheme ultimately in China. It
means that the subsidy funds that renewable electricity producers
received from the government before will mainly come from the
TGC market in future, and Chinese renewable energy support
schemes will experience the evolution from FIT to RPS scheme.
1.2. Literature review
Many countries implement hybrid schemes to encourage
renewable energy development. For instance, seeking to substan-
tially achieve deep decarbonisation targets, UK implemented RPS
scheme, and also proposed CFD scheme (similar with FIT) for
specific technologies. TGC transaction under RPS scheme can be a
supplementary support to wholesale prices to ensure renewable
electricity investors revenues and reduce financial risk (Bunn and
Yusupov, 2015). Furthermore, UK also implemented hybrid
schemes containing Contracts for Difference and Capacity Market
(CFD & CM). CFD addresses regulatory uncertainty under FIT by
employing private law mechanics to guarantee above-loss reward
for low carbon generation, and CM addresses market uncertainty
under RPS by incentivizing the capacity to supply future low carbon
energy based on projected demand, hence creating a predictable
and stable market (Onifade, 2016).
In many countries, renewable energy support schemes have
been evolving due to various factors. The EU revised the FIT scheme
and proposed a market-based Feed-in-Premium (FIP) scheme to
promote renewable energy development. Similar with FIT, FIP
generates two sources of income for the producers: one with the
sale of energy in the electrical market and the other with the
receipt of the premium which differs based on the criteria applied
in each country. As the FIT implemented before over-protected the
renewable energy on-grid price resulting the electricity market
being distorted (Pablo-Romero et al., 2017). Japan experienced the
evolution from RPS to FIT scheme. Japan implemented the RPS
scheme from 2003, but the renewable electricity generation did not
meet the expected target under the scheme (Dong and Shimada,
2017). Some scholars believe that the main reasons for the failure
of RPS in Japan are regulatory factors leading to a bolstered mo-
nopoly of the incumbent power companies and failed attempts at
more stringent policies for renewable energy (Huenteler et al.,
2012; Dave and Kenichi, 2007). Ming et al. (2013) introduce the
evolution and problems of tariff policy in China's renewable in-
dustry in detail. With the continued growth of renewable energy
installed capacity in the future, tariff surcharge subsidy gap is
widening, which hinders the scaling-up of investment needed for
China to reach its renewable energy development goals. Addi-
tionally, the time-lag effect existing in the allocation of subsidy
fund has put a strain on the cash flow for renewable electricity
producers and investors (Jiang et al., 2010). Considering the prob-
lems of tariff policies, Zhang et al. (2018) does the research on
substitution effect of RPS for FIT scheme, and finds that compared
to FIT, RPS will reduce the power sectors' profit, but it can efficiently
reduce the government's expenditure on subsidies for the devel-
opment of renewable energy.
The current theoretical research related to FIT and RPS scheme
focuses on measuring the effectiveness of them. Scholars usually
discuss the effectiveness from the aspects of social welfare, tech-
nology innovation and installation growth of renewable energy
(Dong, 2012). Menanteau et al. (2003) point out that which policy
reaches the high social welfare depends on the curvature of the cost
and benefit functions of the commodity and the level of negative
1275
externality. Early studies find that RPS is more prone to foster
technology innovation because RPS which is a market-based
approach is superior to FIT, a non-market approach, in promoting
technological change (Sun and Nie, 2015; Fischer and Newell, 2008;
Adam and Robert, 1995). Besides, FIT does not have advantages in
encouraging innovation because it guarantees certain benefits to
producers (Jaffe et al., 2003; Popp, 2002).
Besides the social welfare, technology innovation and other
factors, electricity producers' behavioral strategies analysis based
on evolutionary game theory can also reveal the scheme efficiency.
Game theory is generally applied to research player's strategies, for
example, Stackelberg game is used to explore cross-layer interfer-
ence of femto users and macro users to enhance efficiency of the
underlying communication network, and a decentralized decision-
making algorithm is presented for collaborative transmission sys-
tem operators and distribution system operators optimal power
flow implementation (Mohammadi et al., 2018a, 2018b). Evolu-
tionary game theory is long established for improving human lives.
Firstly, it provides fundamental models and methods that enable us
to study the evolution of cooperation among selfish individuals,
including humans (Perc, 2016). Matja z Perc et al. (2017) introduce
the spatial public goods game as the null model for human coop-
eration with providing a description of various extensions of this
model. Secondly, evolutionary game theory has also been applied
to avert crime. It is applied to study the cyclic re-emergence of
crime (Helbing et al., 2018), the role of informants in a crime-
dominated society, and the effects of “carrot and stick” interven-
tion programs on criminal recidivism (D'Orsogna and Perc, 2015).
Thirdly, evolutionary game theory has also been applied to improve
our vaccination strategies as its characteristics of social learning,
bounded rationality, and imperfect information are consistent with
vaccination decision (Bauch and Bhattacharyya, 2012) and utility
functions can reveal payoffs of different strategies (Wang et al.,
2016). However, traditional evolutionary theory has its limitations
in responding to complex interactions among individuals in a
system, as a result, it is usually combined with networks to solve
complex system problems by providing a more apt description of
real-life system than well-mixed models (Wang et al., 2015).
Another reason is that recent advances point that not only do the
strategies of players evolve in time, but so does the environment
and other factors that in turn affect back the strategies which is
called coevolutionary games. Therefore, the introduce of networks
provides a method to study the inherent mechanism of mutual
influence and co-evolution between strategies and environment in
games from a systematic perspective (Perc and Szolnoki, 2010).
1.3. Rationale and structure of the paper
The aim of this paper is to research how to set the scheme pa-
rameters reasonably so that the electricity producers can accept the
RPS scheme as soon as possible so as to promote the orderly evo-
lution of schemes. The schematic overview of this paper is shown in
Fig. 1. In this paper, we firstly build the evolutionary game model of
renewable and conventional electricity producers, and calculate the
evolutionary stability strategy (ESS) of the game. By analyzing the
ESS and replicator dynamic equations of the two players, we
examine the reasonable range of scheme parameters to facilitate
the entire electricity producers accepting RPS implementation.
Then we build the SD model involving TGC market to simulate the
evolutionary game. In the simulation, we take the data of China's
wind power industry as an example to verify the conclusions from
the analysis of the replicator dynamic equation and discuss effects
of various scheme parameters on the evolution of electricity pro-
ducers strategies and the operation of TGC market. Finally, we
provide policy makers with advice on policy parameter settings for
1276 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289
Fig. 1. Schematic overview of this paper.
RPS implementation.
In order to highlight the contribution of our work, we count
them as follows:
C This paper takes the scheme evolution from RPS to FIT as the
research context. RPS scheme will be implemented in China
but there are few researches related to Chinese institutional
background, especially on electricity producers, thus this
paper will fill the gap.
C The evolutionary game model established in this paper is a
macroscopic model from the perspective of government. This
model takes the proportion of electricity producers taking
one strategy as the research object and calculates their total
revenue. As willingness of producers trading TGC will influ-
ence TGC market efficiency thereby affecting RPS scheme
implementation, therefore, government takes the overall
trading willingness of electricity producers as the basis for
assessing RPS implementation effect.
C This paper figures out reasonable range of scheme parame-
ters to ensure all the electricity producers will trade TGC
ultimately and explores impacts of parameters on electricity
producer strategies and TGC market.
2. Methodology
The evolutionary game believes that humans usually achieve a
game equilibrium through trial and error, that is, bounded ratio-
nality, rather than turning human models into a super-reasonable
game player. It has commonalities with the principle of biological
evolution, and emphasizes dynamic equilibrium rather than static
equilibrium. The significance of evolutionary game analysis under
bounded rationality is not to predict one-off game outcomes or
short-term game equilibrium, but to analyze and compare the long-
term stability trend of certain game relationships under a stable
environment, which is consistent with the simulation characteris-
tics of SD. SD is a systems modeling and dynamic simulation
methodology for the analysis of dynamic complexities in socio-
economic and biophysical systems with long-term, cyclical, and
low-precision requirements (Zhao et al., 2018; Kamarzaman and
Tan., 2014). Some scholars have applied evolutionary game theory
and SD model in their researches. Zhao et al. (2016) propose an
evolutionary game model to investigate the possible responses of
enterprises to incentive policies related to the implementation of a
carbon reduction labeling scheme and SD is applied to simulate the
created game mode. Environmental pollution abatement is a
complex project. Wang et al. (2011) build a SD model for studying a
mixed-strategy evolutionary game between the government that
manages environmental pollution and the firm that generates
contamination during their production processes. Thus, we
combine the evolutionary game and SD model to study the complex
dynamic process of evolutionary games under incomplete infor-
mation conditions.
2.1. Theoretical framing analysis
The FIT of renewable electricity (namely on-grid price of
renewable electricity) in China now is actually a fixed-FIT decided
by government, the FIT (pr ) is higher than on-grid price of con-
ventional electricity (pc ), and the higher part is called subsidy (sub)
which comes from Renewable Energy Development Fund built by
government. The subsidy is the capital provided by government to
encourage renewable energy development. However, in the
scheme evolution context, the subsidy will gradually reduce to
zero, and funds from TGC market under RPS scheme will facilitate
renewable energy development in future.
In the evolution context, renewable and conventional electricity
producers are divided into two groups respectively according to
whether they adopt the strategy of trading TGCs. Renewable elec-
tricity producers contain renewable producers trading TGCs (TRs)
and renewable producers not trading TGCs (NTRs). Similarly, con-
ventional electricity producers include conventional producers
trading TGCs (TCs) and conventional producers not trading TGCs
(NTCs). The evolution of strategies are determined by ratio of
trading strategy and relative return of it. If the revenue of TRs or TCs
is higher than the expected revenue of overall renewable or con-
ventional producers, the ratio of electricity producers trading TGCs
will increase.
TGC represents a certain amount of renewable energy, so
through purchasing TGCs, conventional electricity producers can
satisfy the quota requirement. In TGC market, supervision sector is
responsible for issuing TGCs to qualified TCs, and checking whether
the TGCs delivered by conventional producers meet the quota
requirement. If the quota is not satisfied, the supervision sector will
impose fines on them. TGCs are used to track and verify the
compliance as follows. TRs obtain TGCs for generated electricity
from supervision sector. These TGCs can then be purchased in the
TGC market by TCs to comply with the established quota require-
ment and avoid a non-compliance fine. TRs and TCs are suppliers or
demanders in the TGC market. The TGC price and amount of TGC
traded are determined by supply and demand condition in TGC
market. According to (NDRC, 2017) issued by National Development
and Reform Commission (NDRC), the renewable electricity corre-
sponding to TGCs traded in TGC market no longer has subsidy from
FIT scheme. In the evolution from FIT to RPS scheme, theoretical
framework of evolutionary game model between electricity pro-
ducers is shown in Fig. 2.
2.2. Evolutionary game model
To facilitate the theoretical study and establishment of the
model, some assumptions we have made are as follows:
(1) We assume that renewable electricity producers have two
strategies: trading TGCs and not trading TGCs; conventional
electricity producers also have two strategies: trading TGCs
and not trading TGCs.
 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289 1277

Fig. 2. Theoretical framework of evolutionary game model between electricity producers.

(2) We assume that renewable electricity producers are the only Table 1
TGC supplier, and conventional electricity producers are the Game matrix.

only TGC requester. Conventional electricity

(3) We assume that the purpose of electricity producers strate- producers
gies is profit maximization according to the hypothesis of TC (y) NTC (1
y)
economic man.
Renewable electricity producers TR (x) ðp1 ; u1 Þ ðp2 ; u2 Þ
(4) We assume that the proportion of electricity producers tak- NTR (1
x) ðp3 ; u3 Þ ðp4 ; u4 Þ
ing one strategy also represents the same proportion of po-
wer generation.
(5) We assume that conventional electricity on-grid price (pc )
equals its average cost (ACc ) which is fixed as its technology
px ¼ p1 þ p2 ¼
Dc,xqr þ pTGC qTGC þ subðxqr
qTGC Þ (1)
has been relatively mature, and the FIT of renewable elec-
tricity (pr ) equals pr plus subsidy (sub) (Zhao, 2014). p1
x ¼ p3 þ p4 ¼ ðsub
DcÞð1
xÞqr (2)
(6) We assume that TGC is valid for a long time, which means, it
will not expire, so that the conventional producers can buy uy ¼ u1 þ u3
more TGCs at the lower price of TGC, and have TGC holdings


pTGC qTGC ; yqa  qTGC þ qch
in the case of meeting quota requirements. When the TGC ¼

pTGC qTGC
f ðyqa
qTGC
qch Þ ; yqa > qTGC þ qch
price is higher, conventional producers can turn on their TGC
holdings, and buy less TGCs. (3)
(7) One TGC corresponds to one kWh energy.
(8) We assume that there is no financing gap and the delay in the u1
y ¼ u2 þ u4 ¼
f ð1
yÞqa (4)
allocation of subsidies. Renewable electricity producers will
Equation (1) represents the payment function of TRs. TRs’ in-
obtain the appropriate subsidies on time.
come consists of two parts: one part is the proceeds from the sale of
TGCs and on-grid electricity at the price of grid parity, the other
part comes from the on-grid electricity at the price of renewable
2.2.1. Payment functions of players electricity on-grid price including subsidy. Equation (2) represents
In the evolution from FIT to RPS scheme, the two players in the payment function of NTRs. All of their electricity on-grid will
evolutionary game model are renewable and conventional elec- have subsidies as they do not participate in TGC transaction.
tricity producers which have bounded rationality. Two players both Equation (3) represents the payment function of TCs, in which
have two strategies, which are participating in TGC transaction and yqa  qTGC þ qch represents TCs can satisfy quota requirement with
not participating in TGC transaction. The strategy producers adopt turning on yqa TGCs without fine, and yqa > qTGC þ qch represents
reflects their acceptance of RPS scheme. Higher the proportion of TCs cannot satisfy quota requirement with turning on (qTGC þ qch )
electricity producers participating in the TGC transaction, higher TGCs, thus they need to pay the fine. Equation (4) represents the
the acceptance of the RPS scheme is. In this model, x represents the payment function of NTCs in which they have to pay the fine
ratio of TRs in all the renewable producers, and 1
x represents the because they adopt the strategy of not participating in TGC trans-
ratio of NTRs in all the renewable producers. Similarly, y represents action without meeting the quota requirement.
the ratio of TCs in all the conventional producers, and 1
y rep-
resents the ratio of NTCs in all the conventional producers. If the 2.2.2. Stability analysis of the game
profit corresponding to one strategy is higher than that of the other In this section, firstly we figure out the ESS of the game by
strategy, the proportion of players taking this strategy will increase. establishing replicator dynamic equations. Then we research the
The game matrix of the electricity producers is shown in Table 1. reasonable range of scheme parameters to make all of the elec-
The evolutionary game can be seen as a random combination of tricity producers take the strategy of participating in TGC
individuals from two groups (renewable and conventional pro- transaction.
ducers), and the TGC transaction can only be reached when the TR
is combined with TC. The transaction will not be reached in other
2.2.2.1. ESS analysis of renewable electricity producers.
cases. The payment functions of the electricity producers choosing
various strategies are shown in Equation (1)‒(4). The meaning of
each notation in the formula is shown in Table 2. Proposition 1. The replicator dynamic equation of renewable
1278 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289

Table 2
The description of the parameters used in all formulas.

Category Items Description

Variables xðtÞ The ratio of renewable producers participating in TGC transaction in renewable producers
yðtÞ The ratio of conventional producers participating in TGC transaction in conventional producers
qi qr Total generated capacity of renewable electricity producers
ði ¼ r; cÞ qc Total generated capacity of conventional electricity producers
ACi ACr Average cost of renewable electricity
ði ¼ r; cÞ ACc Average cost of conventional electricity
pr FIT of renewable electricity
pTGC TGC price
pr FIT of renewable electricity
sub Subsidy for unit renewable electricity
a Quota requirement in RPS scheme
qa Renewable electricity corresponding to quota requirement
qch TGC holdings in TCs
qTGC Amount of TGCs traded
qiss TGCs issued to TRs
qrh TGC holdings in renewable producers
qtur TGCs TCs turned in for RPS
qs Supply of TGC
qd Demand for TGC
qod Excessive demand for TGC
pflu TGC price fluctuation
ICcum Cumulative installed capacity of renewable energy
Functions pi ði ¼ 1; 2; 3; 4Þ Payment of renewable electricity producers
uj ðj ¼ 1; 2; 3; 4Þ Payment of conventional electricity producers
px Payment of renewable producers participating in TGC transaction
p1
x Payment of renewable producers not participating in TGC transaction
uy Payment of conventional producers participating in TGC transaction
u1
y Payment of conventional producers not participating in TGC transaction
Ur Expected payment of renewable producers
Uc Expected payment of conventional producers
Constants pc On-grid price of conventional electricity
pr0 Initial FIT of renewable electricity before reduction
ACr0 Initial average cost of renewable electricity before reduction
Dc Difference between LCOE of conventional electricity and that of renewable electricity
f Unite fine
p0 The benchmark price of TGC
tadj Adjustment time of TGC price fluctuation
Parameters k Economic parameter
q Learning rate index of cumulative installed capacity

electricity producers is shown in Equation (5) (Ford, 2007), and to 1, and ultimately all renewable producers will be willing to
meanings of notations involved are shown in Table 2. sell TGCs.

Therefore, in order to make all renewable producers take the

" # strategy of participating in TGC transaction, the subsidy (sub) for
dx X4
renewable producers should be lower than TGC price.
FðxÞ ¼ ¼ xðpx
Ur Þ ¼ x ðp1 þ p2 Þ
x pi
dt i¼1
¼ xð1
xÞðpTGC
subÞqTGC (5)
2.2.2.2. ESS analysis of conventional electricity producers. The rep-
licator dynamic equation of conventional electricity producers is
shown in Equations (6) and (7), and meanings of notations involved
Proposition 2. If Fðx* Þ ¼ 0 and its first-order derivative less than are shown in Table 2.
zero (F 0 ðx* Þ < 0), then x* is the ESS. 1) When yqa  qTGC þ qch , which means TGCs that TCs turn on
According to Proposition 2., to figure out the ESS of renewable meet the quota requirement, then TCs do not need to pay the fine,
producers, we set FðxÞ ¼ 0, then we obtain the solution of the according to Proposition 1, the replicator dynamic equation of
equation: x1 ¼ 0, x2 ¼ 1. Their first-order derivatives are F 0 ðx1 Þ ¼ conventional electricity producers is shown in Equation (6).
ðpTGC
subÞqTGC , F 0 ðx2 Þ ¼
ðpTGC
subÞqTGC . ESS of renewable
producers is discussed below. dy  
GðyÞ ¼ ¼ y u y
Uc
dt
2 3
a When pTGC < sub, then x1 ¼ 0 is ESS, and x2 ¼ 1 is not ESS. The X
4
(6)
replicator dynamic phase diagram of renewable producers is ¼ y4ðu1 þ u3 Þ
y uj 5
shown in Fig. 3(a), in which the proportion of TR gradually tend j¼1
to zero, which means ultimately all renewable producers will be
¼ yð1
yÞðyf qa
pTGC qTGC Þ
reluctant to sell TGCs.
b When pTGC > sub, then x2 ¼ 1 is ESS, and x1 ¼ 0 is not ESS. The According to Proposition 2, to figure out the ESS of conventional
replicator dynamic phase diagram of renewable producers is producers, we set GðyÞ ¼ 0, then we obtain the solutions: y1 ¼ 0,
shown in Fig. 3(b), in which the proportion of TR gradually tend y2 ¼ 1, y3 ¼ pTGC qTGC =fqa , and their first-order derivatives
 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289
Fig. 3. Replicator dynamic phase diagram of renewable producers.
are:G0 ðy1 Þ ¼
pTGC qTGC , G0 ðy2 Þ ¼ pTGC qTGC
fqa , G0 ðy3 Þ ¼
pTGC qTGC ð1
pTGC qTGC =fqa Þ. ESS of conventional producers is dis-
cussed below.
a When pTGC qTGC < fqa , then y1 and y2 both are ESS, and y3 exists
but it is not ESS. The replicator dynamic phase diagram of
renewable producers is shown in Fig. 4(a). At the beginning of
the game, if the initial value of y (y0 ) is less than y3 , then the
value of y will tend to be zero, which means ultimately all the
conventional producers will be reluctant to buy TGCs. On con-
trary, if y0 > y3 , then the value of y will tend to be 1, which means
ultimately all conventional producers will be willing to buy
TGCs.
b When pTGC qTGC > fqa , then y1 is ESS, y2 is not ESS, and y3 does
not exist. The replicator dynamic phase diagram of renewable
producers is shown in Fig. 4(b) in which the value of y will tend
to be zero, which means ultimately all conventional producers
will be reluctant to buy TGCs.
Therefore, to ensure that all conventional producers take the
strategy of participating in TGC transaction, the value of unit fine
should meet the condition: f > pTGC qTGC =qa . In addition, when
implementing RPS scheme, policy makers should ensure that
y0 > pTGC qTGC =fqa .
2) When yqa > qTGC þ qch , TCs need to pay the fine, and the
replicator dynamic equation of conventional electricity producers
is shown in Equation (7).
1279
Fig. 4. Replicator dynamic phase diagram of renewable producers (yqa  qTGC þ qch ).
dy  
GðyÞ ¼ ¼ y Ucy
Uc
dt
2 3
X 4
(7)
4
¼ y ðu1 þ u3 Þ
y uj 5
j¼1
¼ yð1
yÞ½ðf ðqTGC þ qch Þ
pTGC qTGC 
According to Proposition 2, to figure out the ESS, we set GðyÞ ¼
0, then we obtain the solution that y1 ¼ 0, y2 ¼ 1, and their first-
order are derivatives G0 ðy1 Þ ¼ f ðqTGC þ qch Þ
pTGC qTGC , G0 ðy2 Þ ¼
pTGC qTGC
f ðqTGC þ qch Þ. ESS of conventional producers is dis-
cussed below.
a When f ðqTGC þ qch Þ < pTGC qTGC , then y1 is ESS, but y2 is not ESS.
The replicator dynamic phase diagram of renewable producers
is shown in Fig. 5(a) in which the value of y will tend to be 0,
which means ultimately all conventional producers will be
reluctant to buy TGCs.
b When f ðqTGC þ qch Þ > pTGC qTGC , then y2 is ESS, but y1 is not ESS.
The replicator dynamic phase diagram of renewable producers
is shown in Fig. 5(b) in which the value of y will tend to be 1,
which means ultimately all conventional producers will be
willing to buy TGCs.
Therefore, in order to make all conventional producers take the
strategy of participating in TGC transaction, the value of unit fine
should meet the condition f > pTGC ,qTGC =ðqTGC þ qch Þ.
2.2.2.3. Mixed ESS analysis of renewable and conventional electricity
producers. Based on the analysis above, we find that if scheme
1280 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289

Fig. 5. Replicator dynamic phase diagram of renewable producers (yqa > qTGC þ qch ).

parameters are set reasonably, renewable and conventional pro-

ducers will take the strategy of participating in TGC transaction
finally, thus we only discuss situation in which ðx; yÞ ¼ ð1; 1Þ is
Fig. 6. Replicator dynamics and stability of game players.
probably the mixed ESS.

1 When yqa  qTGC þ qch , only if sub < pTGC , f > pTGC qTGC =qa , then
implementation, we build the SD model to simulate the evolu-
ð1; 1Þ can probably be the ESS. Evolution of mixed strategy of
tionary game model. Fig. 7 represents the evolutionary game be-
renewable and conventional producers is shown in Fig. 6(a)
tween renewable and conventional producers and TGC market
which describes dynamic evolution of players' behavioral stra-
operation.
tegies and the points Bð1; 0Þ and Cð1; 1Þ are both ESS. The point
There are approximately forty control functions that are used to
Bð1; 0Þ represents that all of renewable producers are willing to
express the quantitative relationships between parameters in this
trade TGCs, but all the conventional producers are reluctant to
flow chart. Due to the limited length of the article, Some functions
trade TGCs. The point Cð1; 1Þ represents that all of electricity
are no longer redundant here such as profits of electricity pro-
producers are willing to trade TGCs. Points in ABFE area will
ducers which are similar with Equation (1)‒(4). Main formulas and
gradually tend to Bð1; 0Þ, and points in CDEF area will tend to
significant functional relationships in strategy evolution and TGC
Cð1; 1Þ. Only when the initial value of ðx; yÞ in CDEF area, can it
market operation are enumerated as follows and meanings of no-
tend to Cð1; 1Þ. Thus, to make all of electricity producers willing
tations involved are shown in Table 2. Interested readers can collect
to participate in TGC transaction finally, policy makers should
all the necessary information from (Friedman, 1998; Yu et al., 2013;
not only make the scheme parameters within the reasonable
Isaac; Derek, 1997) to completely understand the model.
range, but also ensure that y0 > pTGC qTGC =fqa .
2 When yqa > qTGC þ qch , only if sub < pTGC and
ð
f > pTGC ,qTGC =ðqTGC þ qch Þ, then ð1; 1Þ can be the ESS. Evolution dx
xðtÞ ¼ x0 þ ,dt (8)
of mixed strategy of renewable and conventional producers is dt
shown in Fig. 6(b) which reveals the dynamic evolution of
players' behavioral strategies and only the point Cð1; 1Þ is ESS.
ð
The point Cð1; 1Þ represents that all of electricity producers are dy
yðtÞ ¼ y0 þ ,dt (9)
willing to trade TGCs. Points in ABCD area will gradually tend to dt
Cð1; 1Þ. Thus, no matter what the initial values of ðx; yÞ are, only
scheme parameters in the reasonable range, all the electricity
producers will participate in TGC transaction. pTGC
qs ¼ ,qrh (10)
p0
2.3. SD model
ð
In order to study the evolution process of electricity producers qrh ¼ ðqiss
qTGC Þdt (11)
strategies in more detail, and analyze impacts of scheme parame-
ters on the strategy evolution and effectiveness of RPS
 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289 1281

Fig. 7. Electricity producers evolutionary game based SD model.

8 increase of the TGC holdings in TRs and TGC price. Amount of TGCs
<0 issued to TRs is xqr in each period, and TGC holdings in TRs is
; if qch > y,qa
qd ¼ p0 (12) accumulation amount of TGCs held by TR after TGC transaction, as
: kðf
pTGC Þ ,ðy,q
qch Þ ; if qch < y,qa
a
pTGC shown in Equation (11). Demand for TGCs (qd ) is related to TGC
holdings in TCs (qch ) and quota requirement of TCs (yqa ), as shown
ð in Equation (12) (Zhang et al., 2017). If TGC holdings in TCs is higher
qch ¼ ðqTGC
qtur Þdt (13) than yqa , then demand for TGCs is zero; If TGC holdings in TCs is
less than yqa , then demand of TGCs is influenced by TGC price,
quota requirement of TC and fine. TGC holdings in TCs is the
qtur ¼ MINðyqa ; qTGC þ qch Þ (14) accumulation amount of TGCs hold by TC after delivery as shown in
Equation (13). TGCs that conventional producers need to turn on is
ð
the product of quota requirement and total power generation.
pTGC ¼ p0 þ pflu ,dt (15)
Quota requirement represents the proportion of renewable power
generation completed by conventional producers according to
. government requirement to national power generation. TGCs that
pflu ¼ qod ,pTGC tadj ,h (16) TCs turned in for RPS (qtur ) is the minimum amount of quota
requirement of TC and the sum of amount of TGCs traded and TGC
q holdings in TCs, as shown in Equation (14).
ACr ¼ ACr0  IC
(17)
cum TGC price fluctuate on the basis of its benchmark price (p0 ), and
Equation (8) represents the proportion of TR, in which x0 is the TGC price fluctuation is determined by supply and demand of TGC,
initial proportion of TR at the beginning of the game. If profit of TR TGC price, and adjustment time of TGC price fluctuation. Expres-
is higher than expected profit of all the renewable producers, then sion of TGC price and TGC price fluctuation are shown in Equation
proportion of TR (x) will increase until all of renewable producers (15)‒(16). The benchmark price of TGC is set as the difference be-
take the strategy of participating in TGC transaction. The strategy tween the average cost of renewable and conventional energy
evolution of conventional producers is the similar in Equation (9). because it can be seen as subsidy to renewable producers as well as
A subsystem representing TGC market is involved in SD model the environmental cost of conventional producers expenditure,
in which TRs and TCs are respectively supply and demand side of making renewable electricity more competitive.
TGCs. The operation of TGC market is as follows. Firstly, supervision Considering global and Chinese trend in renewable industry, the
sector issues TGCs to TRs according to their power generation. Then average cost of renewable energy declines over the time, so we
TRs sell TGCs to TCs in TGC market. To complete the quota apply the learning curve model to simulate it. According to Gao and
requirement, TCs hand over the TGCs to supervision sector. If there Sun (2014), the average cost is highly correlated with cumulative
are still TGCs left after satisfying quota requirements, TC will hold installed capacity, thus, the learning curve model is shown in
them till next delivery. If TCs still cannot complete the quota Equation (17).
requirement after handing over their TGC holdings and TGCs pur-
chased in current period, they have to pay the fine. 3. Data
Amount of TGCs traded is determined by the minimum amount
of supply and demand of TGCs. Supply of TGCs (qs ) is influenced by Under the support of a serious of policies, China's wind power
TGC holdings in TRs (qrh ) and TGC price (pTGC ), as shown in capacity grew rapidly each year, and the cumulative installation
Equation (10) (Zhao, 2014). The supply of TGCs increases with the grew to 169 GW in 2016, ranking first of the world. From 1990s
1282 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289

Fig. 8. Four periods of market mechanism in China's wind power industry.

Chinese government has implemented various of remarkable pol-
icies to promote the development of wind power industry, such as
the Ride Wind Program. Its main objective is to survey wind re-
sources, plan wind farms, and expand the financial channels for
wind power development.
The market mechanism in China's wind power industry has
experienced four periods which are approval tariff, bidding price,
FIT scheme, and RPS scheme, as shown in Fig. 8. Before 2003, the
price mechanism in wind power industry is approval tariff mech-
anism. The on-grid price is approved by the local price departments
and then should be reported to the Central Government for record.
After 2003, the bidding price mechanism was proposed. The NDRC
organized a few of wind power concession projects, for which in-
vestors were selected via public tender, and the on-grid price is also
determined by tender. From 2009, in order to standardize wind
power prices within a particular area, the NDRC issued the Notice on
Improving Wind Power Pricing, which identified benchmark on-grid
price according to wind resources and construction conditions. This
FIT scheme provided a relatively higher level playing field for wind
farms and ensured the return on investment in different resource
areas. However, with the rapidly development of renewable energy
and changes in external environment, some factors of FIT scheme
that have hindered wind power development are gradually turned
up. On the one hand, the fixed benchmark price isolates the wind
farm from market signals-price, which results that the peak-to-
valley difference increased and the anti-peaking effect is obvious
(Zhang et al., 2009). On the other hand, the level of premium tariff
is relatively low, which is unable to meet the needs of future
development of wind power industry, which means that the
financing gap will be widening (Ming et al., 2013). To alleviate these
problems, Chinese government proposed the implementation of
RPS scheme in 2016. Market based RPS scheme not only play the
role of price signal to guide investment via TGC price, but also
relieve the shortage of Renewable Energy Development Fund and
reduce the financial burden of government.
In this section, we use the SD model to simulate the evolu-
tionary game model of electricity producers taking China's wind
power industry as an example. Our aim of the simulation is to verify
conclusions of the stability analysis of the game model (Section
2.2.2), and present evolution process of electricity producers stra-
tegies and TGC market operation trend in future.
We assume that the simulation time is 10 years (120 months),
the start time is January 2016, and the step size is one month. The
key parameters and their initial values are shown in Table 3, most of

Table 3
Key parameters and their initial values.

Key parameters Initial value Unit Data resource

x0 0.5 e e
y0 0.5 e e
Quota requirement (aðtÞ) 4.1 % China Statistical Yearbook
Monthly growth rate of quota requirement 0.5697 % China Energy Outlook 2030
Monthly growth rate of electricity demand 0.2200 % China Energy Outlook 2030
Wind power generation at the beginning of 2016 1:86  1011 kWh China Statistical Yearbook
Monthly growth rate of wind power generation 0.7901 % China Energy Outlook 2030
Cumulative installed capacity of wind power at the beginning of 2016 145362 MW China Statistical Yearbook
Monthly growth rate of wind power Cumulative installed capacity 0.8335 % China Energy Outlook 2030
Initial FIT of wind power (pr0 ) 0.47 Yuan/kWh China Statistical Yearbook
On-grid price/average cost of conventional electricity (pc /ACc ) 0.3 Yuan/kWh China Statistical Yearbook
Benchmark price of TGC (p0 ) 0.17 Yuan/kWh China Statistical Yearbook
Unit fine (f ) 0.34 Yuan/kWh Ford et al. (2007), YU (2013)
Adjustment time of TGC price fluctuation (tadj ) 2 months Tan et al. (2009)
 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289 1283

which are collected from the China Statistical Yearbook, a survey of
the data from the China Electricity Council and National Energy
Administration. The benchmark on-grid price of wind power is 0.47
Yuan/kWh, and the average on-grid price of conventional power in
the area is 0.3 Yuan/kWh in the same period. Thus the initial value
of subsidy is 0.17 Yuan/kWh, and average cost of wind and con-
ventional power are respectively 0.47 Yuan/kWh and 0.3 Yuan/
kWh, cost difference between them and the benchmark price of
TGC are both 0.17 Yuan/kWh. According to Chinese government
plan and some researches (BJX, 2014; Zhang, 2017), China's wind
power will realize grid parity till 2020 which is to say the subsidy
will decrease to 0 in 2020. Thus the subsidy decreases to 0 linearly
by the end of 2020 and its function is sub ¼ 0:17
0:17=60t. The
initial value of quota requirement is the proportion of China's wind
power generation in national power generation in 2016. The unit
fine set by government is 2 times the benchmark price of TGC (Yu
et al., 2013). According to projections based on China Energy
Outlook 2030, till 2025, wind power generation, national power
generation and quota requirement are respectively 563.8 billion
kWh, 74945 million kWh and 7.5%, and monthly growth rate of
them are 0.79%, 0.22%, and 0.57%.

Fig. 9. Simulation results of benchmark scenario.

1284 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289
4. Results and discussion
4.1. Simulation results and analysis
The main purpose of the simulation by SD model is to verify
conclusions obtained in stability analysis and present evolution
characteristics of electricity producers strategies and operation of
TGC market.
Firstly, we verify conclusions from Section 2.2.2, the results are
shown in Figs. 9 and 10, the horizontal axis represents the evolution
time.
The evolution of electricity producers is shown in Fig. 9(a) in
which the vertical axis represents proportion of TR or TC, and it can
be seen that both renewable and conventional producers tend to
the ESS. From the beginning of t ¼ 0, x and y increase till they both
equal 1 when t ¼ 75, and then ðx; yÞ remains ð1; 1Þ till t ¼ 120. It
can be seen that from the beginning of t ¼ 75, the game reaches
ESS. In line with stability analysis of renewable producers, if TGC
price is higher than subsidy, all of wind power producers will take
the strategy of trading TGC. Fig. 9(b) reveals relationship between
TGC price and subsidy, in which the former is higher than latter all
the time. Thus x reaches its ESS as shown in Fig. 9(a). On the con-
trary, when the subsidy is less than TGC price (as shown in
Fig. 10(a)), the proportion of TR reaches zero which can be seen in
Fig. 10(b).
In the light of stability analysis of conventional producers,
conventional producers’ ESS is related to whether TCs meet the
quota requirement. In reality, Fig. 9(c) reveals the quota
Fig. 10. Simulation results when subsidy less than TGC price and fine is not higher than H1 and H2 .
requirement completion of TCs. In the period of 0  t < 50, TGCs
delivered by TCs do not meet the quota requirement, thus whether
the strategy of conventional producers tends to ESS of y ¼ 1 de-
pends on if the fine (f ) is higher than H1 ¼ pTGC ,qTGC =ðqTGC þ qch Þ.
Fig. 9(d) embodies relationship between f and H1 , in which f > H1
all the time. Thus the value of y has been growing in the period of
0  t < 50. Fig. 10 reflects that TGCs delivered by TCs meet the quota
requirement when 50  t  53, thus whether the strategy of con-
ventional producers tends to ESS of y ¼ 1 depends on if f is higher
than H2 ¼ pTGC qTGC =qa in this period. Fig. 9(e) indicating the rela-
tionship between them reflects that f > H2 all the time, thus the
value of y has also been growing to 1 in this period. According to
conclusion in Section 2.2.2, when f > H2 , to ensure the proportion of
TC reaches 1, the initial value of the proportion (y0 ) should more
than pTGC qTGC =fqa . In the SD model, y0 is the value of y when t ¼ 0,
at that time, pTGC ¼ p0 , qTGC ¼ 0, thus y0 > pTGC qTGC =fqa ¼ 0. It
means if TGCs delivered by TCs meet the quota requirement, as long
as f > H2 , can y increases to 1. In the period of 54  t  120, TGCs
delivered by TCs do not meet the quota requirement, and Fig. 9(d)
shows that f > H1 , thus in this period, y increases to 1 and remains 1
till t ¼ 120. To further validate the conclusion, Fig. 10(d) indicates
that proportion of TC tends to zero when fine is not higher than H1
and H2 (as shown in Fig. 10(c)).
Secondly, we analyze evolution process of electricity producers
strategies. Fig. 9(a) indicates that the value of x grows slowly in
initial period of game, but later, its growth rate gradually acceler-
ates, finally gradually slows down, until x remains 1 all the time.
The replicator dynamic equation of renewable electricity producers
 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289 1285

(Equation (5)) indicates that growth rate of x is influenced by
subsidy, TGC price and the value of x. Larger the difference between
TGC price and subsidy, higher the growth rate of x is. If the value of x
is at a high level, the growth rate of it will be relatively low. In the
early stage of game, although subsidy is declining, the gap between
subsidy and TGC price is not so great, thus growth of x is slower.
However, with the continued decline in subsidy, the gap between
subsidy and TGC price gradually widen, and earnings of wind po-
wer producers trading TGC significantly higher than that of wind
power producers not trading TGC, so the value of x grows rapidly.
Eventually, due to the value of x has grown to a higher level, its
growth rate gradually slows down, and ultimately x stabilized in
the ESS.
As can be seen from Fig. 9(a), the value of y grows fast in the
early stage of game, and then its growth rate gradually slowed
down while y tends to be 1. The replicator dynamic equation of
conventional electricity producers (Equation (6)‒(7)) indicates if
TCs do not satisfy quota requirement, growth rate of y is influenced
by the value of y and f
H1 , otherwise it is influenced by the value
of y and f
H2 . Whether TCs satisfy quota requirement or not, if the
value of y is at a low level, its growth rate will be high. Thus in the
period of 0  t < 50, when TCs do not satisfy quota requirement, as
the value of y is at a low level, and f
H1 is relatively unchanged,
growth rate of y is high. In the period of 50  t  53 when TCs
satisfy quota requirement, as y is higher than before, and f
H2 has
no significant change, thus growth of y declines. In the period of

Fig. 11. Simulation results under different descent modes of subsidy.

1286 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289
54  t  120 when TCs do not satisfy quota requirement, as the
value y has been at a high level, f
H1 is still relatively unchanged,
thus its growth continues to decline until it evolves to ESS.
It can be seen from Fig. 9(a) that y is higher than x when
0  t  50. In the period of 51  t  75, x and y are similar as well
as at a high level and y evolves to 1 prior to x. In the period of
76  t  120, x and y are both 1. It is obviously that conventional
producers are more willing to trade TGCs than wind power pro-
ducers in general. Because the difference between subsidy and TGC
price is not large in early stage, the gap between profit of wind
power producer trading TGCs and wind power producers not
trading TGCs is not obvious, which determines the low growth rate
of x. However, as the fine has been at a high level all the time, in
order to avoid paying the fine, conventional producers’ willingness
to trade TGCs grows rapidly. Thus conventional producers reach to
ESS earlier than wind power producers.
Finally, we analyze the operation of TGC market. TGC price curve
in Fig. 9(b) reveals that TGC price firstly increases gradually, then
decreases, and finally tends to be stable. The fluctuation of TGC
price reveals the supply and demand situation in the market. In
early stage, as the willingness to trade TGC of wind power pro-
ducers is lower than that of conventional producers, TGC demand is
more than supply, so TGC prices increases gradually. With the
subsidy declining to zero, wind power producers’ willingness in-
creases and TGC supply is slightly higher than demand, so TGC price
declines slightly. Eventually, with the wind power and conventional
producers evolving to ESS, the supply and demand is relatively
balanced, thus TGC prices tend to be stable.
On the basis of stability analysis and SD based simulation, we
find that the three scheme parameters(subsidy, fine and quota
Fig. 12. Simulation results under different fine levels.
requirement) have a significant impact on electricity producers
strategies and the operation of TGC market. In addition, these three
parameters are also key considerations which is adjusted by gov-
ernment to ensure the effective implementation of the policy
(Berry and Jaccard, 2001). Thus, in following sections, we analyze
the impact of these three scheme parameters and put forward
relevant policy suggestions.
4.2. Impacts of subsidy descent on scheme evolution
We set up three decline modes of subsidy which are shown in
Fig. 11(a)., which are linear descent (benchmark scenario), stepped
descent (Scenario A) and stage descent (Scenario B) and the subsidy
declines to 0 by the end of 2020 in each scenario. In benchmark
scenario, subsidy decline linearly from 0.17 Yuan/kWh to 0. In
Scenario A, subsidy in each year from 2016 to 2020 are 0.17 Yuan/
kWh, 0.136 Yuan/kWh, 0.102 Yuan/kWh, 0.068 Yuan/kWh, and
0.034 Yuan/kWh, and the subsidy is canceled from early 2021. In
Scenario B, the subsidy drops rapidly at the beginning, and then
declines slowly. From the beginning of 2016 to the end of 2017,
subsidy declines linearly from 0.17 Yuan/kWh to 0.05 Yuan/kWh;
from the beginning of 2018 to the end of 2025, subsidy declines
linearly from 0.05 Yuan/kWh to 0. The simulation results are shown
in Fig. 11(b)‒(e).
Fig. 11(b)‒(d) illustrate the evolution of the electricity producers
strategies and the scale of the TGC transaction under the three
modes of subsidy decline. It can be seen that in Scenario B, elec-
tricity producers evolve to ESS more quickly and scale of TGC
transaction is the largest.
The replicator dynamic equation of x implicates its growth rate
 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289
is related to ðpTGC
subÞ. As can be seen from Fig. 11(a), within
these three descent modes, subsidy in Scenario B is the lowest, so
the value of ðpTGC
subÞ is the highest. It leads that profit difference
between wind power producers taking the transaction strategy and
non-transaction strategy of stage descent is larger than that of
other descent modes, so x in Scenario B is the highest, thus the
demand for TGC is also the largest, which leads TGC price lowest
within three modes as shown in Fig. 11(e) which reveals TGC price
in different scenarios. The lower TGC price make demand for TGC
higher, thus y in Scenario B is also higher. Besides, compared with
Fig. 11(b), curves in Fig. 11(c) are closer which indicates that
changes of the subsidy descent modes have greater impact on the
wind power producers than conventional producers. As willingness
of electricity producers in Scenario B is higher, the scale of TGC
transaction is also the highest in the mode, which is more condu-
cive to establishing TGC market. Moreover, this descent mode is
more beneficial to reduce the financial burden of government
because subsidy under it is the lowest.
4.3. Impacts of fine on scheme evolution
We set three levels of fine, which are 0.34 Yuan/kWh (bench-
mark scenario), 0.4 Yuan/kWh (Scenario C), and 0.3 Yuan/kWh
(Scenario D). The evolution of electricity producers strategies, TGC
price and scale of TGC transaction under different fine levels are as
shown in Fig. 12(a)‒(d).
As can be seen from Fig. 12(a)‒(b), the higher fine can cause
electricity producers to reach ESS as soon as possible. Fig. 12(c)‒(d)
Fig. 13. Simulation results under different quota requirement levels.
1287
implicate that if the fine level is higher, TGC price will be higher,
and the scale of TGC transaction will also be larger. The replicator
dynamic equation of y indicates its growth rate is related to the
value of fine (f ). When the fine level is comparatively higher,
growth rate of y will be higher, which makes the demand for TGC
greater. As larger the demand, higher the price is, TGC price will be
higher under higher level of fine as shown in Fig. 12(c). The higher
price make the supply of TGC greater, so trading TGC willingness of
wind power producers will also be higher, thereby x reaches ESS
earlier. After electricity producers evolving to ESS, supply and de-
mand will be roughly in balance. As the result of the higher fine
level, the demand for TGC of scenario D is higher than that of other
scenarios. Thus, under a high fine level, TGC price will stabilize at a
higher level, and the scale of TGC transaction will be larger as
shown in Fig. 12(c)‒(d). Therefore a higher fine level can improve
the scale of TGC transaction and promote the establishment of the
TGC market and the implementation of RPS scheme.
4.4. Impacts of quota requirement on scheme evolution
We design three levels of quota requirement, which are 7.5%
(benchmark scenario), 8% (Scenario E), and 7% (Scenario F) by 2025,
respectively, and its monthly growth rates are 0.57%, 0.63%, and
0.50%.
Fig. 13(a)‒(b) reveal evolutionary path of wind power and con-
ventional producers’ strategies, it can be seen that the change in
quota requirement has little effect on the evolution of electricity
producers strategies. According to the simulation of SD in
1288 Z. Yi et al. / Journal of Cleaner Production 213 (2019) 1274e1289
benchmark scenario, we find that the TGCs that TCs delivered do
not meet the quota requirement (yqa > qTGC þ qth ) for most of the
period before the game reaching ESS, so the replicator dynamic
equation of conventional producers is Equation (7) which indicates
quota requirement do not have a direct impact on y. Before x
reaching ESS, TGC price differences are not obvious under three
levels of quota, so the evolution of x is also similar.
However, Fig. 13(c)‒(d) show that the quota requirement has a
greater impact on TGC price and the scale of TGC transaction after
the game reaching ESS. It is because that in the benchmark sce-
nario, after the game reaching ESS, the supply and demand is
relatively balanced. However, if the quota is at a lower level, which
means the demand is reduced, the amount of TGCs traded will
obviously decline. The descent in the amount of TGCs traded cause
the increase of TGC holdings in wind power producers, which re-
sults that the supply of TGC will also increase. Thus the increase of
supply makes the TGC price decreases clearly. But if the quota
requirement is higher than benchmark level, although the demand
will rise, it will have little effect on the amount of TGCs traded,
because the amount of TGCs traded is determined by the minimum
of the supply and demand. Thus, compared with benchmark sce-
nario, the fluctuation range of TGC price and TGC transaction scale
of higher quota is less than that of lower quota. Therefore, when
policy makers design quota requirement, in order to promote the
development of the TGC market, the value of quota requirement
should be avoided too low.
5. Conclusions and implications
In this paper, we establish the evolutionary game model and SD
model to research interaction between scheme parameters and
electricity producers. This paper draws some conclusions from the
theoretical perspective.
To ensure all the electricity producers trading TGC, the condition
that parameters should satisfy is that: (1) subsidy should be lower
than TGC price; (2) When TC can meet the quota requirement, unit
fine should be higher than ratio of TGC trading scale to amounts of
TGC corresponding to quota requirement, otherwise, unit fine
should be higher than ratio of TGC trading scale to amounts of TGC
that TC submit. Furthermore, the stage descent of subsidy and
higher level of fine are more conducive to urging electricity pro-
ducers reaching ESS earlier and promoting the scale of TGC trans-
action growth, but a lower quota requirement makes TGC prices
and transaction scale at an obviously low level, which limits the
development of TGC market.
Based on the above researches and conclusions, we propose
several policy recommendations. First of all, to ensure the evolution
of electricity producers strategies to the ESS, the government
should set scheme parameters in the reasonable range based on the
actual situation of the TGC market. Second, policy makers can adopt
similarly stage descent mode of subsidy. Finally, to promote the
development of the TGC market and the implementation of the RPS
scheme, policy makers should avoid setting the quota requirement
too low.
On the basis of this paper, the future research can be further
studied from multiple perspectives. On the one hand, one of the
assumptions in this paper is a perfect competition market, but in
reality, the energy market containing several large-scale electricity
producers is a monopoly market, thus the future research can study
games between electricity producers in monopoly market. On the
other hand, future research can also study how to improve the
effectiveness of RPS implementation by considering the factors
such as electricity producers’ profit, environmental benefit, R&D
input, consumer surplus and so on.
Acknowledgement
This paper is supported by the Beijing Municipal Social Science
Foundation (No. 16JDYJB031), and the Fundamental Research Funds
for the Central Universities (No. 2018ZD14).
Appendix A
Table 1List of abbreviations
Abbreviations Description
FIT Feed-in tariff
RPS Renewable portfolio standards
FIP Feed-in-Premium
SD System dynamics
TGC Tradable green certificate
TR(s) Renewable electricity producer(s) trading TGC
NTR(s) Renewable electricity producer(s) not trading TGC
TCs Conventional electricity producer(s) trading TGC
NTCs Conventional electricity producer(s) not trading TGC
ESS Evolutionary stability strategy
NDRC National Development and Reform Commission
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