Computing a Strategic Decarbonization Pathway: A Chance-Constrained Equilibrium Problem

TL;DR

This paper models strategic state regulatory competition in US electricity markets using a chance-constrained equilibrium framework to analyze its impact on renewable energy policy implementation.

Contribution

It introduces a novel CC-EPEC model and a customized Progressive Hedging algorithm to study multi-state regulatory interactions in decarbonization efforts.

Findings

Regulatory competition can hinder renewable energy targets.

The proposed method effectively solves complex equilibrium problems.

Strategic interactions influence policy outcomes and market efficiency.

Abstract

US transmission systems and wholesale electricity markets, albeit federally regulated, often span across multiple state jurisdictions. In this environment, state regulators can strategically exploit this techno-economic coupling to advance their clean energy policy goals at the expense of neighboring jurisdictions. This paper investigates strategic regulatory competition to understand its effect on achieving Renewable Portfolio Standards (RPS). We formulate a chance-constrained equilibrium problem with equilibrium constraints (CC-EPEC), which considers multiple state regulators, acting in coordination with in-state power companies, to implement RPS goals in the least-cost manner. To solve this CC-EPEC, we customize a Progressive Hedging (PH) algorithm. The case study uses the CCEPEC and PH algorithm to analyze the effects of state regulatory competition in the ISO New England system.