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Coping with the renewable portfolio standards: a utility’s perspective. (English) Zbl 1478.91170

Summary: Renewable portfolio standards require utilities to supply a percentage of their energy from renewables. Utilities demonstrate their compliance by purchasing renewable energy or renewable energy certificates. Certificates can be traded in a secondary market. This flexibility is intended to foster an efficient environment. Utilities, however, have not been reacting strategically. We formulate the utility’s problem as a stochastic dynamic program and present optimal policies for the utility to trade in the REC market and to purchase from the energy market.

MSC:

91G10 Portfolio theory
91B76 Environmental economics (natural resource models, harvesting, pollution, etc.)
90C15 Stochastic programming
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