sustainability

Article
The Evolution of Renewable Energy Price Policies
Based on Improved Bass Model: A System Dynamics
(SD) Analysis
Xin-gang Zhao 1,2 , Yu-zhuo Zhang 1,2, * ID
and Yan-bin Li 1,2
1 School of Economics and Management, North China Electric Power University, Changping,
Beijing 102206, China; 1162106029@ncepu.edu.cn (X.Z.); 1152206070@ncepu.edu.cn (Y.L.)
2 Beijing Key Laboratory of New Energy and Low-Carbon Development, North China Electric
Power University, Changping, Beijing 102206, China
* Correspondence: hdzyz1102@126.com




Received: 5 May 2018; Accepted: 25 May 2018; Published: 26 May 2018


Abstract: Many countries in the world have implemented many price support policies to promote the
development of renewable energy, and there are evolutionary processes between different policies
at different stages of national development. Existing literature has less research on the internal
mechanism and alternative process of renewable energy price policies’ evolution process. In view
of this, this paper innovatively introduces the classic model of innovation diffusion theory, the Bass
model, into the renewable energy price mechanism, and improves it on the basis of the traditional
Bass model, and then proposes a system dynamics (SD) simulation based on the improved Bass model
to study the evolution process of the renewable energy price policies. This paper mainly studies
the evolution process of the policies from feed-in tariff (FIT) to renewable portfolio standard (RPS),
and takes China’s wind power industry as an example to simulate the model. The results show that
FIT can effectively and quickly evolve to RPS based on the internal influence of the interaction among
power generation enterprises and the external influence of government behaviors. All the power
generation enterprises will implement RPS, and the amount of green power enterprises eventually
grows steadily and slowly. In addition, increasing the decline rate of FIT subsidy and RPS unit fine
can effectively promote the evolution of RPS policy, and also improve the amount of green power
enterprises and the activity of the tradable green certificates (TGC) trading market.

Keywords: renewable energy; feed-in tariff; renewable portfolio standard; bass model;
system dynamics

1. Introduction
Many countries in the world have implemented a number of price support policies to promote
the development of renewable energy. They have made institutional choices according to their energy
policy goals and actual national conditions [1]. The policies and regulations of various countries
are varied. The evaluation of these policies focuses on the strategic choice and social responsibility
of the renewable energy industry. At present, all the renewable energy price support policies can be
roughly divided into two categories, which are feed-in tariff (FIT) mechanism and renewable portfolio
standard (RPS) [2]. The economic strength and resource conditions of a certain country are different
at different stages of national development, thus, the renewable energy price policies will change,
and there will be an evolutionary process between the policies. For example, China’s renewable energy
is currently implementing FIT, and it will begin to implement RPS in 2018 according to the provisions
of China’s power system reform [3]. The implementation and evolution of renewable energy price
policies in typical countries and regions are shown in Figure 1.

Sustainability 2018, 10, 1748; doi:10.3390/su10061748 www.mdpi.com/journal/sustainability

Sustainability 2018, 10, x FOR PEER REVIEW 2 of 20

policies will change, and there will be an evolutionary process between the policies. For example,
China’s renewable energy is currently implementing FIT, and it will begin to implement RPS in 2018
according to
Sustainability the
2018, 10,provisions
1748 of China’s power system reform [3]. The implementation and evolution
2 of 20
of renewable energy price policies in typical countries and regions are shown in Figure 1.

Spain FIT

Germany FIT

Italy RPS FIT

The United Kindom RPS FIT

California, USA RPS

Australia RPS

Japan RPS FIT

Korea FIT RPS

China FIT RPS

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Time

Figure 1. The renewable energy price policies in typical countries and regions.
regions.

The studies
The studieson onthethe evolution
evolution of renewable
of renewable energy price price
energy policies are notare
policies richnotat present.
rich at Dongpresent.et
al. [4] studied the evolution from RPS to FIT for the deployment of
Dong et al. [4] studied the evolution from RPS to FIT for the deployment of renewable energy in Japan renewable energy in Japan by
employing
by employing a dominant
a dominant firm-competitive
firm-competitive fringe
fringemodel.
model.They Theyfoundfoundthat thatnonrenewable
nonrenewable firms will
firms will
suffer a areduction
suffer reduction in revenue
in revenue underunder both schemes,
both schemes, and the producers
and the renewable renewablebehave producers behave
competitively
and act as price takers. Dong [5] examined the relative effectiveness of FI and RPS in promotingRPS
competitively and act as price takers. Dong [5] examined the relative effectiveness of FI and windin
promoting wind capacity development using panel data, and he founds
capacity development using panel data, and he founds that FIT increases total wind capacity more than that FIT increases total wind
capacity
RPS. Ming more
et al.than RPS. Ming the
[6] introduced et al. [6] introduced
current development the current
situation development
of renewable situation
energy, of renewable
analyzed the
energy, analyzed the evolution and implementation effect of the renewable
evolution and implementation effect of the renewable energy tariff policy, and discussed the problems energy tariff policy, and
discussed
of the problems
the renewable energyoftariff the renewable energyPyrgou
policy in China. tariff policy in China.
et al. [7] examined Pyrgou et al. [7] examined
the regulatory and policythe
regulatory and
framework of FITpolicy framework
scheme, of FIT
specifically its scheme,
effect onspecifically its effectpricing
both the electricity on bothasthe wellelectricity
as the localpricing
and
as well as the local and European renewable energy sources market, and
European renewable energy sources market, and accordingly the definition of its feasibility as a scheme accordingly the definition
of its
for thefeasibility as a schemeand
further development forpromotion
the furtherofdevelopment
renewable energy and promotion
technologies. of renewable
Boomsma etenergy al. [1]
technologies. Boomsma et al. [1] studied the market and policy
studied the market and policy risk under different renewable electricity support schemes, and they risk under different renewable
electricity
found thatsupport schemes,
the differences in and
market theyriskfound that the
between differences
support schemes in like
market risk RPS
FIT and between
are lesssupport
than
schemes like FIT and RPS are less than commonly believed
commonly believed due to price diversification. Schallenberg-Rodriguez [8] assessed the performance due to price diversification.
Schallenberg-Rodriguez
of RPS system and FIT system, [8] assessed the performance
and analyzed of RPSand
their advantages system and FIT system,
disadvantages, therebyand analyzed
contributing
their advantages and disadvantages, thereby contributing to the
to the worldwide debate on the suitability of the different renewable energy sources support worldwide debate on the suitability
of the different
systems. Aquilarenewable energy sources
et al. [9] overviewed andsupport
discusssystems. Aquila etpolicies
some long-term al. [9] overviewed
that have been and applied
discuss
some long-term policies that have been applied in several countries,
in several countries, such as FIT and RPS, and the main advantages and disadvantages of these such as FIT and RPS, and the
main advantages
incentive strategiesand disadvantages
are emphasized, of these
focusing incentive strategies
on applications. Xu et al.are [10]emphasized,
focused on the focusing
evolution,on
applications. Xu et al. [10] focused on the evolution, implementation
implementation status and problems of the wind power tariff policy in China. Shahnazari et al. [11] status and problems of the
wind power
reported tariffgained
insights policyfrom in China. Shahnazari
an integrated realet al. [11]and
options reported
portfolio insights gained from
optimization modelanofintegrated
electricity
real options and portfolio optimization model of electricity generation
generation investment behaviur under political uncertainty over the futures of interacting carbon investment behaviur under
political uncertainty over the futures of interacting carbon pricing
pricing and RPS instruments. Chang et al. [12] investigated the policy system in China which aimsand RPS instruments. Chang et al.
to
[12] investigated the policy system in China which aims to facilitate
facilitate the transition to sustainable construction, and the results show that the behaviors of variousthe transition to sustainable
construction,inand
participants the the results show
construction that including
industry, the behaviors of various participants
the government, developers, in the construction
builders, suppliers,
and designers, are regulated and controlled by these laws and regulations.
Sustainability 2018, 10, 1748 3 of 20

It can be seen that most of the existing literature has studied the influence of different renewable
energy price policies on the electricity market’s development and the trading entities’ behaviors.
Few scholars pay attention to the internal mechanism and logical relationship of the policy evolution
and the replacement process between the original and new mechanisms. In view of this, this paper aims
to fill this gap. This paper innovatively introduces the classic model of innovation diffusion theory,
the Bass model, into the renewable energy price mechanism, and improves it on the basis of the
traditional Bass model, and then proposes a system dynamics (SD) simulation based on the improved
Bass model to study the evolution process of the renewable energy price policies. The SD model of
the evolution of renewable energy price policies based on the improved Bass model proposed in this
paper not only clearly reflects the internal mechanism and alternative process of policy evolution,
but also effectively simulates the development trend of the electricity market under the change of the
price mechanism, which has important theoretical research value and practical reference significance.
The organization of the paper is as follows. Section 2 illustrates the improvements of traditional
Bass model, and proposes the SD model of policies’ evolution. Section 3 provides the case study with
China’s wind power. Section 4 discusses the impact of the change of the two endogenous variables on
the results. The conclusion is given in Section 5.

2. Methodology
The Bass model was proposed by Bass in 1969. Its basic usage is used to describe the process of
innovation diffusion. After the continuous research by scholars, it is used in various fields, such as
product replacement and technological innovation. The basic principle of the Bass model is to
integrate the external and internal influences on the technology from the overall market response. It is
consistent with the characteristics of the evolutionary process of the renewable energy price policies,
which are the government behaviors (external) and interactions among power generation enterprises
(internal). This section firstly improves the Bass model, and then proposes the SD simulation model
of price policies’ evolution. 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 [13,14]. Some scholars have combined the Bass model with
the SD simulation to study the innovation diffusion. Lucia et al. [15] combine the Bass model and
SD simulation to develop a model of the German photovoltaic market for small plants on private
houses and tests public policies. L.L.C. et al. [16] use the SD technique in conjunction with the Bass
model to foresee the diffusion of photovoltaic systems in residential consumers throughout time.
Benvenutti et al. [17] develop a SD model based on Bass model to investigate the impact of public
policies in the long-term diffusion dynamics of alternative fuel vehicles in Brazil. It can be seen that
SD provides an effective aid for studying the process of innovation diffusion.

2.1. Improved Bass Model

Fourt and Woodlock (1960) thought that diffusion patterns of technological innovation in potential
markets could be described by Formula (1) through the study of some diffusion phenomena:

dN  
= p × N − N (t) (1)
dt

where, N (t) is the amount of companies accumulating technology innovations up to time t. N is

the market potential. p is the external influence coefficient (p > 0). dN
dt is the amount of companies
adopting technological innovation at time t. This model only considers the effect of external influences
on adopters, and the coefficient p can be understood as the unit effect of external influences.
Sustainability 2018, 10, 1748 4 of 20

Mansfield (1961) considered that the diffusion law of technological innovations in the potential
market can be described by Formula (2) by studying the diffusion process of more than a dozen
industrial technological innovations:

dN q  
= × N (t) × N − N (t) (2)
dt N
where, q is the internal influence coefficient (q > 0). This model only considers the effects of
internal influences on potential adopters. The imitative coefficient q reflects the interaction strength
q
between adopters N (t) and non-users N − N (t), and N can be understood as the unit effect of
internal influences.
In 1969, Bass combined the models of external influence and internal influence, and put forward
the famous Bass model shown as Formula (3):

dN   q  
= p × N − N (t) + × N (t) × N − N (t) (3)
dt N
The proposed Bass model is based on a series of assumptions, which include: (1) The market
potential remains unchanged over time; (2) the adopters are indifferent or homogeneous; (3) the
innovative diffusion is not affected by marketing strategy; (4) the product performance remains
unchanged over time; (5) the geographical boundaries of social systems do not change with the
diffusion process; (6) the diffusion process is divided into two stages: no adoption and adoption;
(7) there are no supply constraints; (8) the interaction among adopters plays a constant role in the
diffusion of innovation; (9) a diffusion of innovation is independent of other innovations’ diffusion.
Some of the assumptions of the Bass model make inadequacies in practical applications. This study
improves these deficiencies as follows:
The Bass model simply divides technological innovation into two stages in the diffusion process,
which are adoption and no adoption. In fact, while digesting, absorbing, and utilizing technological
innovation knowledge, the whole diffusion process should adopt a three-phase analysis mode of “do
not adopt-await to adopt-adopt”, and the three phases are continuation in time and have time-delayed.
The Bass model assumes that the market potential remains the same over time. In reality,
companies should consider entering and exiting behaviors in the technological innovation process.
This study assumes that companies enter or exit the market within a certain range of probability,
which means that market potential fluctuates within a certain range.
Since the market potential is not constant, the impact of the interaction among adopters on
innovation diffusion should also be changed.
The key to the successful adoption of technological innovation by enterprises is the transfer and
utilization of innovative knowledge. This is not analyzed in the Bass model. Actually, the absorption,
digestion, and utilization of innovative knowledge are accompanied and play a decisive role in the
whole process of technological innovation.
The Bass model only embodies the process of innovation and diffusion of new technologies,
and does not reflect the replacement and evolution between new and original technologies.
Based on the above five improvements, the logic framework of improved Bass model in this study
is shown in Figure 2.
Sustainability 2018, 10, x FOR PEER REVIEW 5 of 20

Based on the above five improvements, the logic framework of improved Bass model in this
Sustainability 2018, 10, 1748 5 of 20
study is shown in Figure 2.

Improvement point (5)

Enterprises waiting for
Adopters of original Internal and external the conversion of new
technology influences of original technologies
technology

Improvement point (3) and (4)

The circulation Influence of

Influence of
and utilization external
interactions
of knowledge behavior

Internal and external

Enterprises waiting for
Potential enterprises influences of new Adopters of new
adopting new
in the market technology technology
technologies

Improvement point (1)

Improvement point (2)

Probability of Probability of
entering the market leaving the market

Figure 2. The
Figure logic
2. The framework
logic of the
framework improved
of the Bass
improved model.
Bass model.

2.2. TheThe
2.2. SDSD
Model of Policies’
Model Evolution
of Policies’ Evolution
AsAs mentioned
mentioned in in
thethe
introduction,
introduction, thethe
evolution
evolutionof of
renewable
renewable energy
energyprice policies
price in in
policies different
different
countries
countries or regions is different, but its principles are basically the same. This study uses theuses
or regions is different, but its principles are basically the same. This study the
evolution
evolution
process of process
China’s ofcurrent
China’srenewable
current renewable
energy price energy
policy price
as anpolicy as an
example, thatexample, that is, the
is, the evolution from
evolution from FIT to RPS. FIT is a scheme designed to accelerate investment
FIT to RPS. FIT is a scheme designed to accelerate investment in renewable energy technologies. in renewable energy It is
technologies. It is a government-led
a government-led regulatory mechanism regulatory mechanism
that requires powerthatgrid
requires powertogrid
enterprises buyenterprises to
electricity from
buy electricityenergy
renewable from renewable
producers energy producers at government-specified
at government-specified prices [18].
prices [18]. To encourage To encourage of
the development
thethe
development of the renewable energy power industry under FIT, the government
renewable energy power industry under FIT, the government subsidizes the electricity price subsidizes the of
electricity
renewable price of renewable
energy power. RPS energy power.
is a main RPS is a main
promotion scheme promotion
of a quotascheme of a quota
obligation basedobligation
on tradable
based on tradable green certificates (TGC) trading market. It is structured
green certificates (TGC) trading market. It is structured as a quantity regulation, letting as a quantity regulation,
the market
letting the market
determine determine
a reasonable pricea reasonable
for renewable priceenergy
for renewable
power [19].energy power
In this [19]. In governments
approach, this approach,set
governments set targets
targets or quotas to ensureor quotas to ensure
that power that power purchase
grid enterprises grid enterprises
a certainpurchase a certain
market share market or
of capacity
share of capacity or generation of electricity coming from renewable energy sources
generation of electricity coming from renewable energy sources [20]. To ensure the implementation [20]. To ensure
theofimplementation of RPS, the government will punish power generation
RPS, the government will punish power generation enterprises who do not fulfill their quota enterprises who do not
fulfill their quota
obligations obligations
by setting a fine.by setting a fine.
ToToclearly
clearlyrepresent
represent the
the dynamic
dynamicevolution
evolutionofof
price policies,
price we establish
policies, a stock
we establish and flow
a stock anddiagram
flow
(SFD) of evolution process from FIT to RPS using Vensim based on the logic
diagram (SFD) of evolution process from FIT to RPS using Vensim based on the logic framework framework ofofthe
improved Bass model above, as shown in Figure 3. The SFD is a good tool for modeling
the improved Bass model above, as shown in Figure 3. The SFD is a good tool for modeling the cause the cause and
effect relationships between various components of the SD model [21]. The SFD is
and effect relationships between various components of the SD model [21]. The SFD is divided into divided into two
modules,
two modules,which
whichareare
the the
price policies’
price evolution
policies’ process
evolution module
process and the
module andTGCthe trading marketmarket
TGC trading module.
The specific analysis is as follows.
module. The specific analysis is as follows.
 Sustainability 2018, 10, 1748 6 of 20
Sustainability 2018, 10, x FOR PEER REVIEW 6 of 20

<coefficient of successful
The price policies’ utilization of explicit
evolution process knowledge flow (α)>
utilization degree of <explicit knowledge
Decline rate of FIT explicit knowledge stock (ek)>
external influence
subsidy flow (Ek1)
coefficient (P1)

FIT-enabled power power generation

generation speed of external influence (p1) enterprises waiting to
convert from FIT to RPS RPS policy
enterprises (M1) (W1) conversion speed (s1)
speed of internal influence (q1)
utilization degree of tacit
knowledge flow (Tk1)
success rate of
interactions (E1)
coefficient of successful
internal influence utilization of tacit
coefficient (Q) knowledge flow (β)
success rate of tacit knowledge
FIT implementation interactions (E2) stock (tk)
speed
probability of enterprises
annual average probability of enterprises leaving the market (O2)
price of TGC joining the innovation (I2) utilization degree of tacit
knowledge flow (Tk2)

potential power power generation RPS-enabled power

generation enterprises speed of internal influence (q2) generation enterprises
enterprises waiting to (green power enterprises)
in the market (M2) implement RPS (W2) RPS implementation
speed (s2) (N)
speed of external influence (p2)
explicit knowledge
probability of enterprises stock (ek)
probability of enterprises utilization degree of
leaving the innovation (O1)
entering the market (I1) RPS unit fine explicit knowledge
external influence flow (Ek2) coefficient of successful
utilization of explicit
coefficient (P2)
knowledge flow (α)

TGC TGC price

trading
market
expected amount of
TGC sales
TGC price fluctuation TGC issued to green
TGC oversupply power enterprises
TGC held by
expected amount of green power
enterprises
RPS quota TGC purchases unit power generation of
growth rate green power enterprise

RPS quota ratio TGC sold to grid

<Time> TGC held by power company
grid power amount of expired TGC of
electricity demand TGC turned in company green power enterprises
growth rate electricity demand for RPS
amount of expired TGC TGC valid period
of grid power company

Figure 3. The stock and flow diagram (SFD) of evolution process from feed-in tariff (FIT) to
3. The stock
Figureportfolio
renewable and flow
standard diagram (SFD) of evolution process from feed-in tariff (FIT) to renewable
(RPS).
portfolio standard (RPS).
2.2.1. The price policies’ evolution process module.
2.2.1. The Price Policies’ Evolution Process Module
The internal influence in the evolution of the price policy is mainly the interactions among
The internal
power generation influence in the evolution of the price policy is mainly the interactions among power
enterprises:
generation enterprises:
q q1E=EQ1 ×MQ × M1
1 1 (4) (4)
1
q2 = E2 × Q × M2 (5)
q2  E2  Q  M 2 (5)
N
E1 =N (6)
N + M1
E1  (6)
N  M 1N
E2 = (7)
2 N+M
N
E2 Q = TGCap × η (7) (8)
N  M2
Sustainability 2018, 10, 1748 7 of 20

The speed of internal influence q1 and q2 is determined by the interactions among power
generation enterprises that implement FIT or RPS, and the internal influence coefficient Q.
Where, the interactions of FIT enterprises are represented by the interactive frequency N + M1 between
RPS-enabled power generation enterprises (hereinafter referred to as green power enterprises) N and
FIT-enabled power generation enterprises M1 , and E1 indicates the success rate of their interactions.
Similarly, the interactions of RPS enterprises are represented by the interactive frequency N + M2
between green power enterprises and potential power generation enterprises in the market M2 , and E2
indicates the success rate of their interactions. The reason that annual average price of TGC (TGCap )
affects Q is that the power generation enterprises will choose to implement different policy mechanisms
according to the changes of TGCap . If TGCap is high, the power generation enterprises believe that
trading TGC is profitable, which will promote the implementation of RPS. Therefore, Q and TGCap are
positive correlation, η is the economic parameter and greater than 0.
The external influence in the evolution process is mainly government behaviors. The government
promotes the implementation of the RPS policy mainly through two strategies: on the one hand,
it reduces the FIT subsidy to promote the FIT-enabled power generation enterprises to implement RPS;
on the other hand, it sets a RPS fine to promote the market potential enterprises to implement RPS.

p1 = P1 × M1 (9)

p2 = P2 × M2 (10)

P1 = Decline rate o f FIT subsidy × δ (11)

P2 = RPS unit f ine × ϕ (12)

The speed of external influence p1 and p2 is determined jointly by M1 and M2 , and external
influence coefficients P1 and P2 , respectively. Where, P1 is affected by the decline rate of FIT subsidy,
and P2 is affected by RPS unit fine. δ and ϕ are economic parameters.
In the process of price policies’ evolution, the RPS policy conversion speed s1 and RPS
implementation speed s2 are determined jointly by explicit knowledge and tacit knowledge that
can be used by the power generation enterprises. From the perspective of knowledge accumulation,
the essence of technological innovation is the integration, activation, innovation and utilization
of existing knowledge bases. The activation, circulation and utilization of explicit knowledge are
relatively easy, and that of tacit knowledge are relatively difficult. Tacit knowledge can be divided into
internal tacit knowledge and external tacit knowledge. We use tacit knowledge stock tk to represent
internal tacit knowledge, and use E1 and E2 to express the impact of external tacit knowledge, so that
the utilization degree of tacit knowledge flow Tk can be obtained as:

Tk1 = E1 × tk × β (13)

Tk2 = E2 × tk × β (14)

where, β is the coefficient of successful utilization of tacit knowledge flow. Similarly, the utilization
degree of explicit knowledge flow Ek can be obtained as:

Ek1 = P1 × ek × α (15)

Ek2 = P2 × ek × α (16)

where, ek is the explicit knowledge stock. α is the coefficient of successful utilization of explicit
knowledge flow.
There are two processes passed from M2 to N, which are M2 → M1 → W1 → N and
M2 → W2 → N . Both of these two processes are continuous, which means that there is a delay
in time, that is, N lags behind W1 and W2 , W1 lags behind M1 , and W2 lags behind M2 . This type of
Sustainability 2018, 10, 1748 8 of 20

lag time can be expressed as a DELAY function in SD simulation. In addition, when considering the
non-independence of the policies’ evolution process, we use the probability of enterprises entering
or leaving the market I1 , I2 , O1 , and O2 to represent non-independent behaviors, which will cause
fluctuations in market potential. In summary, the amounts of power generation enterprises in each
phase are as follows:
Z
M1 = (FIT implementation speed − q1 − p1 ) × dt + M10 (17)
Z
M2 = (−FIT implementation speed − q2 − p2 + I1 × M2 ) × dt + M20 (18)
Z
W1 = ( DELAY (q1 + p1 − s1 , time)) × dt + W10 (19)
Z
W2 = ( DELAY (q2 + p2 − s2 , time) + ( I2 − O1 ) × W2 ) × dt + W20 (20)
Z
N= ( DELAY (s1 + s2 , time) − O2 × N ) × dt + N0 (21)

FIT implementation speed = − TGCap × λ (22)

where, M10 , M20 , W10 , W20 , and N0 are the initial values of the amount of power generation enterprises
in each phase. time is the delayed time. To facilitate readers’ better understanding, we use a simple
numerical example to illustrate Formulas (17)–(21). It is assumed that p1 = p2 = q1 = q2 = 0.5t,
s1 = s2 = 0.8t, FIT implementation speed = 0.2t, I1 = I2 = 0.05, O1 = O2 = 0.03, time = 6,
M = M20 = 100, W10 = W20 = N0 = 0, and the total time is 20, and then, M1 =
R 2010 R 20
0 (0.2tR− 0.5t − 0.5t ) dt + 100 = −52, M2 = 0 (− 0.2t − 0.5t − 0.5t + 0.05 × M2 )dt + 100 = − 48.25,
20 R 20
W1 = 0 ( DELAY (0.2t, 6))dt + 0 =21, W2 = 0 ( DELAY (0.2t, 6) + 0.02 × W2 )dt + 0 = 23.2,
R 20
N = 0 ( DELAY (1.6t, 6) − 0.03 × N )dt + 0 = 146. We use Vensim to test their change processes,
and the results are shown as Figures 4 and 5. The reason that FIT implementation speed is affected by
TGCap is because if TGCap is high, the power generation enterprises believe that the TGC transaction
is profitable, which will promote RPS implementation and be harmful to FIT implementation.
Thus, FIT implementation speed and TGCap are negative correlation. λ is the economic parameter
and greater than 0.

2.2.2. TGC Trading Market Module

The authors of this paper have studied and analyzed the TGC market transaction process under
RPS in detail in the previous research. The main describes of TGC market are provided here. Interested
readers can refer to the literature [18–21] for more detailed information.
TGC is a freely tradeable certificate similar to currency, which represents renewable energy power
generation. In general, one unit TGC represents 1 kWh renewable energy power generation. The TGC
trading market is a competitive market. The TGC trading volumes of the market is a certain percentage
of electricity demand. This percentage is the RPS quota ratio set by the government, which can reflect
the government’s policy objectives. In the TGC market, TGC demanders (such as power grid company)
and TGC suppliers (such as green power enterprises) purchase and sell TGCs, respectively.
 power generation.
power generation. In In general,
general, one
one unit
unit TGC
TGC represents
represents 11 kWh
kWh renewable
renewable energy
energy power
power generation.
generation.
The TGC trading market is a competitive market. The TGC trading volumes
The TGC trading market is a competitive market. The TGC trading volumes of the market is of the market is aa
certain percentage
certain percentage of of electricity
electricity demand.
demand. This
This percentage
percentage is
is the
the RPS
RPS quota
quota ratio
ratio set
set by
by thethe
government, which can reflect the government’s policy objectives. In
government, which can reflect the government’s policy objectives. In the TGC market, TGCthe TGC market, TGC
demanders (such
demanders (such as as power
power grid
grid company)
company) and
and TGC
TGC suppliers
suppliers (such
(such as
as green
green power
power enterprises)
enterprises)
Sustainability 2018, 10, 1748 9 of 20
purchase and
purchase and sell
sell TGCs,
TGCs, respectively.
respectively.
选择的变量
选择的变量
200
200

100
100
Dmnl
Dmnl

0
0

-100
-100

-200
-200
0 2 4 6 8 10 12 14 16 18 20
0 2 4 6 8 10 12 14 16 18 20
Time ("-")
Time ("-")
M1 : Current M2 : Current
M1 : Current M2 : Current

Therest
Figure4.4.The
Figure resultsofof M
restresults andM2M
M11and . 2.
Figure 4. The rest results of M 1 and M 2 .
选择的变量
选择的变量
200
200

150
150
Dmnl
Dmnl

100
100

50
50

0
0
0 2 4 6 8 10 12 14 16 18 20
0 2 4 6 8 10 12 14 16 18 20
Time ("-")
Time ("-")
N : Current W2 : Current
N : Current W2 : Current
W1 : Current
W1 : Current

Figure 5. The rest results of W , W2 , and N.

Figure 5. The rest results of W11 , W 2 , and N .
Figure 5. The rest results of W 1 , W2 , and N .

The expected amount of TGC sales (TGCsales ) is based on TGC held by green power
The expected
The expected amount
amount of
of TGC
TGC sales TGCsales )) isis based
sales (TGC based on TGC TGC held
held byby green
green power
power enterprises
enterprises
enterprises (TGChp ), and changes with (the sales of TGC on
change price (TGC p ), that is the green power
TGC hp ),), plan
((TGC
enterprises and changes
and changes with
the saleswith
amountthe by
the change ofthe
takingof
change TGC
TGC ratioprice
of the
price TGC
((TGC p ), that
current TGCis totheTGCgreen power
initial enterprises
price (TGC p0 )
hp p ), that isp the green power enterprises
asplan
a reference
the sales [22].
sales amount When
amount by based
by taking on
taking the marginal
the ratio
ratio of cost
of the price,
the current TGC
TGC0 p to
current TGC p is the
to TGCdifference
TGC initial between
initial price TGC p0 long
price ((TGC the ) as a
plan the p0 ) as a
run marginal cost of renewable energy and that of traditional ppower. Thus, TGCsales is shown as
reference [22].
reference [22]. When
When based
based on
on marginal
marginal cost
cost price,
Formula (23). Similarly, the expected amount of TGC purchases
TGC
price, TGC p is the
is the difference
difference between
between the the long
long run
run
p0 (TGC purchases ) is shown as Formula (24).
0

TGC held by
marginal a power
cost of grid company
renewable energy (TGC
and )
that is the
of difference
traditional between
power. TGC TGC
Thus, sold sales
to a power
is shown gridas
marginal cost of renewable energy and that hd of traditional power. Thus, TGC sales is shown as
company (TGCsold ) and TGC turned in for RPS (TGCt ). According to Refs. [18–21], the TGC has
a valid period, that is, TGC can be stored. When the quota meets the requirements, the TGC price is
at a low level. At this time, the grid power company can trade with the green power enterprises at
a lower price, and purchase the TGC. The stored TGC can be used in the next turn-in period. The green
power enterprises need to sell TGCs, and the grid power company needs to turn TGCs in RPS before
expiration. Thus, TGC valid period affects the amount of TGCsold , which is shown by using extremal
function as Formula (25) in Vensim, where TGCed is the amount of expired TGC of grid power company,
and TGCes is the amount of expired TGC of green power enterprises. TGCt is determined by electricity
demand and RPS quota ratio each year. In the competitive market, TGC p is directly determined
by the trading volumes between the TGC demanders and the suppliers, and the greater the supply
 demanders and the suppliers, and the greater the supply of TGC, the higher the TGC price. Thus,
TGC price fluctuation ( TGC pf ) is negatively correlated with TGC oversupply ( TGCo ), as shown in
Formula (26) [23].  is the adjustment coefficient. In addition, TGC ap is the annual average value
of TGC p 2018,
Sustainability , which is expressed
10, 1748 as a smooth function in Vensim. The meaning of TGC ap parameter
10 of 20
is that the impact of the TGC price on the FIT implementation speed and the internal influence
coefficient cannot be instantaneous, that is, the power generation enterprises need a certain reaction
of TGC, the higher the TGC price. Thus, TGC price fluctuation (TGC p f ) is negatively correlated with
(delay) time to make a decision based on the change of TGC price, as shown in Formula (27). Where,
TGC oversupply (TGCo ), as shown in Formula (26) [23]. σ is the adjustment coefficient. In addition,
time' is the delay time.
TGCap is the annual average value of TGC p , which is expressed as a smooth function in Vensim.
The meaning of TGC
To facilitate ap parameter
readers’ betterisunderstanding,
that the impact weof the
useTGC price on
a simple the FIT implementation
numerical speed
example to illustrate
Formulas (23)–(27). It is assumed that TGC p  0.25 , TGC p0  0.1 , and TGC hp  30 , and then
and the internal influence coefficient cannot be instantaneous, that is, the power generation enterprises
need a certain reaction (delay) time to make a decision based on the change of TGC price, as shown in
TGCsales(27).
Formula  0Where,  300 is the
.25 / 0.1time If TGC
75 .delay hd  40 and TGCt  20 , and then TGC purchases  0 ; if
time.
 20 and  40 ,understanding, purchases  0.1 / 0.25  40  20   8 . It is assumed
TGC Tohdfacilitate readers’
TGCtbetter and then TGCwe use a simple numerical example to illustrate
Formulas (23)–(27). It is assumed that TGC p = 0.25, TGC p0 = 0.1, and TGChp = 30, and then
that TGCed  10 , TGC purchases  8 , TGCes  5 , and TGCsales  12 , and then
TGCsales = 0.25/0.1 × 30 = 75. If TGChd = 40 and TGCt = 20, and then TGC purchases = 0;
ifTGC
TGCsoldhd = MIN
20 andMAX 
TGCt10 
=,840,, MAX  5,12 TGC
and then 
 10 
. It = is
purchases 0.1/0.25 × (40 −
assumed that
20) = TGC o 
8. It is120 and
assumed
that TGCed 3= 10, TGC purchases = 8, TGCes =35, and TGCsales = 12, and then TGCsold =
  2 10 , and then TGC  120  2 10  0.24 . It is assumed that TGC changes
MI N ( MAX (10, 8), MAX (5, 12)) pf= 10. It is assumed that TGCo = 120 and σ = 2 × 10−3 , pand then
withp f time
TGC = − changes,
120 × 2 and× 10time
−3 = ' 12 , the total
−0.24. time is 120,
It is assumed thatand
TGCthen the test with
p changes of TGC
resulttime ap is
changes,
and timeas
shown 0 =Figure
12, the6.total time is 120, and then the test result of TGCap is shown as Figure 6.
选择的变量
0.4

0.3
yuan/kwh

0.2

0.1

0
0 12 24 36 48 60 72 84 96 108 120
Time ("-")
TGCap : Current TGCp : Current

Figure 6. The test result of TGCap .

TGCsales = TGC p /TGC p0 × TGChp (23)

(
0 , i f TGChd > TGCt
TGC purchases = (24)
TGC p0 /TGC p × ( TGCt − TGChd ) , i f TGChd ≤ TGCt
   
TGCsold = MI N MAX TGCed , TGC purchases , MAX ( TGCes , TGCsales ) (25)

TGC p f = − TGCo × σ (26)

0


TGCap = SMOOTH TGC p , time (27)

3. Case Study

3.1. Data
This study uses China’s wind power as an example for simulation. On the one hand, wind power
is currently a relatively mature industry with large installed capacity, low cost and mature technology
in all renewable energy sources in China [24]. By the end of 2017, China’s wind power installed
capacity ranked first in the world [25]. On the other hand, the wind power market is the first to start
Sustainability 2018, 10, 1748 11 of 20

the implementation of RPS in China [3], and it has a certain representativeness. The initial time of the
study was January 2016. The unit of time is month. The step size is one month. The total simulation
time is 120 months (10 years).
According to Refs. [26,27], the current amount of FIT-enabled wind power enterprises is 150,
that is, M10 = 150. We assume that the initial value of potential wind power enterprises in the
market is 150, that is, M20 = 150. The initial value of the amount of wind power enterprises in other
phases is 0, that is, W10 = 0, W20 = 0, and N0 = 0. According to Refs. [27,28], the decline rate of
FIT subsidy of China’s wind power industry is 0.35% per month. According to Ref. [29],ek = 0.4,
tk = 0.6, α = 0.5, and β = 0.5. All the initial values of TGC trading market is the same with Ref. [19],
where, RPS unit fine is 1 yuan/kWh, TGC p0 is 0.1 yuan/kWh, the unit power generation of green
power enterprise is 4.5 × 106 kWh per month, the RPS quota growth rate is 0.0126 per month, and the
electricity demand growth rate is 0.0025 per month. All the amounts and speeds in this study only
represent numerical values, and there are no units for them.

3.2. Results and Analysis

The simulation results are shown in Figure 7. By contrast, we find that the amount of potential
wind power enterprises and speed of external influence in our simulation gradually decrease, and the
speed of internal influence rises first and then declines, which are consistent with the results in Ref. [29].
The TGC price in our simulation rises first, then falls, and continues to fluctuate, which is consistent
with the results in Refs. [18–21]. This proves that our simulation results are consistent with those of
other scholars. In addition, we compare the simulation results of our study with China’s 13th Five-Year
Plan data (Table 1), and find that the error is within a reasonable range (less than 5%), indicating that
the model in this paper is reasonable.

Table 1. The comparison of simulation results with planning data.

13th Five-Year Plan Simulation Results Error

The installed capacity of wind power 2.1 × 108 kW 2.03 × 108 kW 3.33%
The power generation of wind power 4.2 × 1011 kWh 4.01 × 1011 kWh 4.52%

We can see from Figure 7a that, the potential wind power enterprises in the market and the
FIT-enabled power enterprises gradually decrease to 0, which means that FIT policy gradually evolves
into RPS policy, and all the potential wind power enterprises and the FIT-enabled power enterprises
eventually tend to implement RPS. We can see from Figure 7b–g that in the initial stage of RPS
implementation (0 ≤ t ≤ 20), TGC demand is greater than supply, and TGC oversupply is less than
zero and gradually decreases, and TGC price gradually increases. This affects the speed of internal
influence q1 and q2 , and at this time, wind power enterprises believe that trading TGC is profitable,
thus, there are frequent interactions among power generation enterprises, and the success rate of
interaction is high. q1 and q2 show a rapid upward trend, and s1 and s2 also increase. The green
power enterprises grow slowly in the initial stage is due to the effects of time delays in the evolution
of policies. With the orderly implementation of RPS (21 ≤ t ≤ 120), the installed capacity of wind
power gradually improves, and TGC supply increase. The TGC oversupply turns from falling to rising,
and gradually becomes excess demand. At this time, TGC price begins to gradually decline after
rising to the peak value of 0.22 yuan/kWh, resulting in the decrease of q1 , q2 , s1 , and s2 . Due to
the time delays, the green power enterprises continue to grow rapidly, and then start to decline.
As the growth of wind power installed capacity slows down and electricity demand continues to
increase, TGC oversupply gradually declines again, and TGC price fluctuate accordingly. In the whole
simulation time, the external influence p1 and p2 is continuously declining. Combined with internal
and external influences, s1 and s2 continue to fluctuate and eventually stabilized, and the amount
of green power enterprises fluctuates for a period of time and eventually grows steadily and slowly.
 decline after rising to the peak value of 0.22 yuan/kWh, resulting in the decrease of q1 , q2 , s1 , and
s2 . Due to the time delays, the green power enterprises continue to grow rapidly, and then start to
decline. As the growth of wind power installed capacity slows down and electricity demand
continues to increase, TGC oversupply gradually declines again, and TGC price fluctuate
accordingly. In the whole simulation time, the external influence p1 and p2 is continuously
Sustainability 2018, 10, 1748 12 of 20
declining. Combined with internal and external influences, s1 and s2 continue to fluctuate and
eventually stabilized, and the amount of green power enterprises fluctuates for a period of time and
(Note: B in the
eventually ordinate
grows of Figure
steadily 7f is the(Note:
and slowly. counting
B inunit
the automatically generated
ordinate of Figure by Vensim
7f is the software,
counting unit
and 1B = 1 × 10 9 ).
automatically generated by Vensim software, and 1B = 1 × 109).
选择的变量
200

150
Dmnl

100

50

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"FIT-enabled power generation enterprises (M1)" : Current
"potential power generation enterprises in the market (M2)" : Current

Sustainability 2018, 10, x FOR PEER REVIEW 13 of 20

选择的变量
(a)
8

6
Dmnl

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"speed of external influence (p1)" : Current
"speed of internal influence (q1)" : Current

选择的变量
(b)
8

6
Dmnl

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"speed of external influence (p2)" : Current
"speed of internal influence (q2)" : Current
选择的变量
(c)
40

20
mnl

0
 0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"speed of external influence (p2)" : Current
"speed
Sustainability 2018, of internal influence (q2)" : Current
10, 1748 13 of 20

选择的变量
(c)
40

20
Dmnl

-20

-40
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"RPS implementation speed (s2)" : Current
"RPS policy conversion speed (s1)" : Current
Sustainability 2018, 10, x FOR PEER REVIEW 14 of 20
RPS-enabled power generation enterprises
Sustainability 2018, 10, x FOR PEER REVIEW
(d) (green power enterprises) (N)14 of 20
RPS-enabled power generation enterprises (green power enterprises) (N)
600
600

450
450

300
300

150
150

00
00 1212 24
24 36
36 48 60
60 72
72 84
84 9696 108 120
108 120
Time (Month)
(Month)
"RPS-enabled
"RPS-enabled power
power generationenterprises
generation enterprises(green
(green power
power enterprises)
enterprises) (N)"
(N)" :: Current
Current

TGC oversupply
oversupply
(e)
(e)
2020BB

10 B
10 B
MW

0
MW

-10 B
-10 B

-20 B
-20 B 0 12 24 36 48 60 72 84 96 108 120
0 12 24 36 48Time (Month)
60 72 84 96 108 120
TGC oversupply : Current Time (Month)
TGC oversupply : Current
TGC
(f) price
0.4
TGC
(f) price
0.4

0.3
0.3
an/kWh

0.2
Wh
 -20 B
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
Sustainability 2018,TGC oversupply : Current
10, 1748 14 of 20

TGC
(f) price
0.4

0.3
yuan/kWh

0.2

0.1

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
TGC price : Current

(g)

Figure 7. The simulation results of policies’ evolution. (a) The change of M1 and; (b) The change of p1
and q1 ; (c) The change of p2 and q2 ; (d) The change of s1 and s2 ; (e) The change of N; (f) The change of
TGC oversupply; (g) The change of TGC price.

4. Discussion
As mentioned above, the external influences in the model are mainly government behaviors,
which are the decline of FIT subsidy and RPS unit fine. These two parameters are controllable by
the government, and appear as exogenous variables in the model. The government can control the
speed of RPS implementation by changing the decline rate of FIT subsidy and the size of RPS unit fine.
Therefore, we will discuss the impact of changes in these two exogenous variables on policy evolution
and the development of the TGC market in this section.

4.1. Decline Rate of FIT Subsidy

We set three scenarios of the decline rate of FIT subsidy as 0.25%, 0.35%, and 0.45% per month,
respectively, and the results are shown as Figure 8. It shows that the higher the decline rate of
FIT subsidy, the faster the amount of FIT-enabled wind power enterprises declines, and the faster the
policy evolves (in Figure 8a); the greater the fluctuation of RPS policy conversion speed, indicating
that the higher the utilization degree of knowledge flow, and the better the RPS policy evolution effect
(in Figure 8b); the faster and more the green power enterprises grow (in Figure 8c); the greater the
fluctuation of TGC price, and the more active the TGC trading market (in Figure 8d). Thus, it can be
seen that increasing the decline rate of FIT subsidy contributes to the policies’ evolution, which can
increase the amount of green power enterprises and the activity of the TGC trading market.
 policy evolves (in Figure 8a); the greater the fluctuation of RPS policy conversion speed, indicating
that the higher the utilization degree of knowledge flow, and the better the RPS policy evolution
effect (in Figure 8b); the faster and more the green power enterprises grow (in Figure 8c); the greater
the fluctuation of TGC price, and the more active the TGC trading market (in Figure 8d). Thus, it can
be seen that increasing the decline rate of FIT subsidy contributes to the policies’ evolution, which
Sustainability
can increase 10, 1748
2018,the amount of green power enterprises and the activity of the TGC trading market. 15 of 20
FIT-enabled power generation enterprises (M1)
200

150
Dmnl

100

50

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"FIT-enabled power generation enterprises (M1)" : decline rate of FIT subsidy=0.0025 simulation
"FIT-enabled power generation enterprises (M1)" : decline rate of FIT subsidy=0.0035 simulation
"FIT-enabled power generation enterprises (M1)" : decline rate of FIT subsidy=0.0045 simulation

Sustainability 2018, 10, x FOR PEER REVIEW (a) 16 of 20

RPS policy conversion speed (s1)
40

20
Dmnl

-20

-40
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"RPS policy conversion speed (s1)" : decline rate of FIT subsidy=0.0025 simulation
"RPS policy conversion speed (s1)" : decline rate of FIT subsidy=0.0035 simulation
"RPS policy conversion speed (s1)" : decline rate of FIT subsidy=0.0045 simulation

RPS-enabled power generation enterprises

(b) (green power enterprises) (N)
600

450

300

150

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"RPS-enabled power generation enterprises (green power enterprises) (N)" : decline rate of FIT subsidy=0.0025 simulation
"RPS-enabled power generation enterprises (green power enterprises) (N)" : decline rate of FIT subsidy=0.0035 simulation
"RPS-enabled power generation enterprises (green power enterprises) (N)" : decline rate of FIT subsidy=0.0045 simulation

TGC
(c) price
0.4

0.3
yuan/kWh

0.2
 0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"RPS-enabled power generation enterprises (green power enterprises) (N)" : decline rate of FIT subsidy=0.0025 simulation
"RPS-enabled power generation enterprises (green power enterprises) (N)" : decline rate of FIT subsidy=0.0035 simulation
Sustainability 2018, "RPS-enabled
10, 1748 power generation enterprises (green power enterprises) (N)" : decline rate of FIT subsidy=0.0045 simulation 16 of 20

TGC
(c) price
0.4

yuan/kWh
0.3

0.2

0.1

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
TGC price : decline rate of FIT subsidy=0.0025 simulation
TGC price : decline rate of FIT subsidy=0.0035 simulation
TGC price : decline rate of FIT subsidy=0.0045 simulation

(d)
Sustainability 2018, 10, x FOR PEER REVIEW 17 of 20
Figure 8. The simulation results under various decline rates of FIT subsidy.(a) The change of M1 under
various decline
Figure rates
8. The of FIT subsidy;
simulation (b) The
results under change
various of srates
decline 1 under various
of FIT decline
subsidy.(a) Therates of FIT
change of Msubsidy;
1
(c) The change of N under various decline rates of FIT subsidy; (d) The change of TGC price under
under various decline rates of FIT subsidy; (b) The change of s1 under various decline rates of FIT
various decline rates of FIT subsidy.
subsidy; (c) The change of N under various decline rates of FIT subsidy; (d) The change of TGC
price under various decline rates of FIT subsidy
4.2. RPS Unit Fine
4.2. RPS
We Unit Fine
set three scenarios of the RPS unit fine as 0.8 yuan/kWh, 1 yuan/kWh, and 1.2 yuan/kWh,
respectively,
We and the results
set three areofshown
scenarios as unit
the RPS Figure
fine9.asIt0.8
shows that the1 higher
yuan/kWh, the RPS
yuan/kWh, unityuan/kWh,
and 1.2 fine, the faster
respectively,
the amount and the results
of potential wind are shown
power as Figure 9.
enterprises in Itthe
shows that declines,
market the higher and
the RPS
the unit
fasterfine,
thethepolicy
evolves (in Figure 9a); the greater the fluctuation of RPS implementation speed, indicating the
faster the amount of potential wind power enterprises in the market declines, and the faster that the
higherpolicy evolves (in Figure
the utilization degree9a); the greater the
of knowledge fluctuation
flow, and theofbetter
RPS implementation
the RPS policyspeed, indicating
evolution effect (in
that the higher the utilization degree of knowledge flow, and the better the RPS policy evolution
Figure 9b); the faster and more the amount of green power enterprises grow (in Figure 9c); the greater
effect (in Figure 9b); the faster and more the amount of green power enterprises grow (in Figure 9c);
the fluctuation of TGC price, and the more active the TGC trading market (in Figure 9d). Thus, it can
the greater the fluctuation of TGC price, and the more active the TGC trading market (in Figure 9d).
be seen that increasing the RPS unit fine contributes to the policies’ evolution, which can increase the
Thus, it can be seen that increasing the RPS unit fine contributes to the policies’ evolution, which can
amount of green
increase power of
the amount enterprises
green power and the activity
enterprises andof thethe TGC of
activity trading market.
the TGC trading market.
potential power generation enterprises in the market (M2)
200

150
Dmnl

100

50

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"potential power generation enterprises in the market (M2)" : RPS unit fine=0.8 simulation
"potential power generation enterprises in the market (M2)" : RPS unit fine=1 simulation
"potential power generation enterprises in the market (M2)" : RPS unit fine=1.2 simulation

RPS implementation
(a) speed (s2)
40

20
mnl

0
 0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"potential power generation enterprises in the market (M2)" : RPS unit fine=0.8 simulation
"potential power generation enterprises in the market (M2)" : RPS unit fine=1 simulation
Sustainability 2018, 10, 1748
"potential power generation enterprises in the market (M2)" : RPS unit fine=1.2 simulation 17 of 20

RPS implementation
(a) speed (s2)
40

20

Dmnl

-20

-40
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"RPS implementation speed (s2)" : RPS unit fine=0.8 simulation
"RPS implementation speed (s2)" : RPS unit fine=1 simulation
"RPS implementation speed (s2)" : RPS unit fine=1.2 simulation

(b)
Sustainability 2018, 10, x FOR PEER REVIEW 18 of 20
RPS-enabled power generation enterprises (green power enterprises) (N)
600

450

300

150

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
"RPS-enabled power generation enterprises (green power enterprises) (N)" : RPS unit fine=0.8 simulation
"RPS-enabled power generation enterprises (green power enterprises) (N)" : RPS unit fine=1 simulation
"RPS-enabled power generation enterprises (green power enterprises) (N)" : RPS unit fine=1.2 simulation

TGC
(c) price
0.4

0.3
yuan/kWh

0.2

0.1

0
0 12 24 36 48 60 72 84 96 108 120
Time (Month)
TGC price : RPS unit fine=0.8 simulation
TGC price : RPS unit fine=1 simulation
TGC price : RPS unit fine=1.2 simulation

(d)

Figure 9. The simulation results under various RPS unit fines. (a) The change of M 2 under various
Figure 9. The simulation results under various RPS unit fines. (a) The change of M2 under various RPS
RPS unit
unit fines; (b) fines; (b) Theofchange
The change of svarious
s2 under 2 underRPS
various
unitRPS unit
fines; (c)fines; (c) The change
The change of Nvarious
of N under under RPS
various
unit fines; (d)RPS
Theunit fines; of
change (d)TGC
The change of TGCvarious
price under price under
RPS various RPS unit fines
unit fines.

5. Conclusions
This paper improves the traditional Bass model and proposes an evolutionary SD model of
renewable energy price mechanism based on the improved Bass model. This study mainly improves
the Bass model from the following aspects: (1) We divide the diffusion of technological innovation
into three phases, and there is a delay effect between each phase. (2) We introduce the random
Sustainability 2018, 10, 1748 18 of 20

5. Conclusions
This paper improves the traditional Bass model and proposes an evolutionary SD model of
renewable energy price mechanism based on the improved Bass model. This study mainly improves
the Bass model from the following aspects: (1) We divide the diffusion of technological innovation into
three phases, and there is a delay effect between each phase. (2) We introduce the random probability
of enterprises entering or leaving the market, and assume that the market potential fluctuates within
a certain range. (3) We introduce the knowledge stock and consider its impact on the adoption speed
of technological innovation. (4) We combine the original technology with the new technology to build
the development system and consider the evolution process between them.
This paper mainly studies the evolution process of the policies from FIT to RPS, and takes China’s
wind power industry as an example to simulate the model. The model and case study proposed
in this paper are in good agreement with the Chinese government’s decisions. On the one hand,
the external influences considered in our study are all mechanisms that the Chinese government
is implementing or will implement. On the other hand, by comparing the simulation data of our
study with the planning data of the Chinese government, it is found that the simulation results are in
line with the development trend of China’s wind power in the future. The results show that, on the
one hand, the power generation enterprises judge whether they are willing to implement RPS and
communicate with each other by observing the fluctuation of TGC price, which forms the internal
influence in the process of policy evolution. On the other hand, the government has an external
influence on the evolution process by reducing FIT subsidies and setting RPS fine. Both of the internal
and external influences affect the degree and speed of knowledge flow, thereby promoting policies’
evolution. The results of the evolution is that FIT can effectively and quickly evolve to RPS, and all
the power generation enterprises will implement RPS, and the amount of green power enterprises
eventually grows steadily and slowly. In addition, increasing the decline rate of FIT subsidy and RPS
unit fine can effectively promote the evolution of RPS policy, and also improve the amount of green
power enterprises and the activity of the TGC trading market.
This paper notes some limitations that are still to be improved upon. Many existing literature
have studied the impact of FIT and RPS on the profits and risks of the renewable energy industry and
produced different perspectives [30–32]. However, our study does not consider the role of profits and
risks in the process of policies’ evolution. Future studies can comprehensively consider these factors,
so that the research results will be more consistent with the actual situations.

Author Contributions: X.Z. was mainly responsible for the writing of the full text; Y.Z.Z. conceived and designed
the experiments, and wrote the first half of the paper; Y.L. wrote the second half of the paper, and provided
financial support.
Acknowledgments: This paper is supported by the Beijing Municipal Social Science Foundation (No. 16JDYJB031),
the Fundamental Research Funds for the Central Universities (No. 2018ZD14), and the 111 Project (No. B18021).
Conflicts of Interest: The authors declare no conflicts of interest.

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