Government regulation of renewable energy generation and transmission in China’s electricity market

Abstract To build a clean, safe, sustainable and decarbonized energy system, China has been optimizing its energy supply structure and focusing on renewable power generation, transmission, and government policies. The development of renewable energy generation and transmission involves the strategic interaction among fossil-energy power plants, provincial power grids and provincial governments, whose interests are inconsistent. Poor integration and the increasing curtailment of renewable energy are posing an unprecedented challenge to China's electricity sector. Thus, to cope with the market failure and effectively guide the performance of game agents to maximize the overall interests, it’s necessary to strengthen government regulation on renewable power generation and transmission. Based on previous researches, this research establishes an evolutionary game model of renewable power generation and transmission from the perspective of bounded rationality and multi-agents game to analyze the necessity and effectiveness of strengthening relevant government regulation. Apart from exploring the evolutionary stability strategy and the governing boundary conditions, this research also investigates the influence of exogenous variables through simulation analysis. Two central findings are as follows: first, the only evolutionary stable equilibrium lies on government regulation, power plant obedience, and power grid allowance. Second, reasonable government punishment will accelerate the formation of the market equilibrium.

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