INVESTMENT STRATEGY FOR RENEWABLE ENERGY AND ELECTRICITY SERVICE QUALITY UNDER DIFFERENT POWER STRUCTURES

Abstract

This paper investigates and develops an electricity supply chain with an electricity generator and electricity retailer. The electricity generator invests in renewable energy and sells the electricity to the electricity retailer; the retailer then sells the electricity to consumers according to electricity service quality. Three models are considered: the vertical Nash game, the electricitygenerator Stackelberg model, and the electricity-retailer Stackelberg model. Finally, the optimal solutions under different power-structure models are compared. Certain conclusions can be drawn from the findings: (1) the highest electricity service quality and renewable energy investment are obtained in the vertical Nash game model, the electricity generator obtains more profits in the electricity-generator Stackelberg model, and the electricity retailer obtains more profits in the electricity-retailer Stackelberg model. (2) The investment in renewable energy in the electricity-generator Stackelberg model is less than that in the electricity-retailer Stackelberg model, and the investment in electricity service quality in the electricity-retailer Stackelberg model is less than that in the electricity-generator Stackelberg model (under certain conditions). (3) Both increasing the electricity service quality sensitivity and renewable energy sensitivity could increase the optimal electricity price, electricity demand, electricity service quality, renewable energy investment, and supply-chain enterprises’ profit.