Solar Renewable Energy Certificate Markets (SREC ) markets are a relatively novel market-based system to incentivize the production of energy from solar means. A regulator imposes a floor on the amount of energy each regulated firm must generate from solar power in a given period , providing them with certificates for each generated MWh. Firms offset these certificates against the floor , paying a penalty for any lacking certificates. Certificates are tradable assets, allowing firms to purchase/sell them freely. In this work, we formulate a stochastic control problem for generating and trading in SREC markets for a regulated firm's perspective accounting for generation and trading costs, and the impact both have on prices. We provide a characterisation of the optimal strategy using the stochastic maximum principle and develop a numerical algorithm to solve this control problem , Based on this numerical solution, we provide detail and intuition for the optimal strategy for a regulated firm .
SREC markets are a relatively novel market-based system to incentivize the production of energy from solar means. A regulator imposes a floor on the amount of energy each regulated firm must generate from solar power in a given period and provides them with certificates for each generated MWh. Firms offset these certificates against the floor and pay a penalty for any lacking certificates. Certificates are tradable assets, allowing firms to purchase/sell them freely. In this work, we formulate a stochastic control problem for generating and trading in SREC markets from a regulated firm's perspective . We account for generation and trading costs, the impact both have on SREC prices, provide a characterization of the optimal strategy , and develop a numerical algorithm to solve this control problem . Through numerical experiments, we explore how a firm who acts optimally behaves under various conditions. We find that an optimal firm's generation and trading behaviour can be separated into various regimes, based on the marginal benefit of obtaining an additional SREC, and validate our theoretical characterization of the optimal strategy. We also conduct parameter sensitivity experiments and conduct comparisons of the optimal strategy to other candidate strategies .
R
Solar Renewable Energy Certificate Markets (SREC )
SREC
R
, providing
and provides
R
, paying
and pay
R
for
from
R
accounting
. We account
D
and
R
prices. We provide a characterisation
SREC prices, provide a characterization
R
using the stochastic maximum principle
,
R
, Based on this numerical solution, we provide detail and intuition for the optimal strategy for a regulated firm
. Through numerical experiments, we explore how a firm who acts optimally behaves under various conditions. We find that an optimal firm's generation and trading behaviour can be separated into various regimes, based on the marginal benefit of obtaining an additional SREC, and validate our theoretical characterization of the optimal strategy. We also conduct parameter sensitivity experiments and conduct comparisons of the optimal strategy to other candidate strategies