Renewable generation expansion under different support schemes: A stochastic equilibrium approach

Salvador Pineda*, Trine K. Boomsma, Sonja Wogrin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Following the deregulation of electricity markets, a current challenge of policy makers is to facilitate the transition to a sustainable power system at the highest welfare for society. In this paper we investigate the efficiency of different support schemes, such as a feed-in tariff, a feed-in premium and tradable green certificates, with respect to incentivizing the required investments in renewable generation. We consider a number of generation expansion problems, and formulate stochastic equilibrium models that account for uncertainty in demand and renewable supply, the risk-aversion of investors and the competitiveness of the market. The problem of the policy maker is formulated as a mathematical program with equilibrium constraints (MPEC) and as a non-linear complementarity problem (NCP) for the feed-in schemes and the certificate market, respectively. Our models are solved for a small illustrative example and a larger case study based on the Danish power system. The results confirm that the main driver for the optimal choice of renewable support scheme is the aversion of power producers towards price and volume risk, while the competitiveness of the market rarely affects such choice.

Original languageEnglish
Pages (from-to)1086-1099
Number of pages14
JournalEuropean Journal of Operational Research
Issue number3
Publication statusPublished - 1 May 2018
Externally publishedYes


  • Generation expansion equilibrium
  • Renewable target
  • Risk-aversion
  • Stochastic programming
  • Support scheme

ASJC Scopus subject areas

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management


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