Pricing Renewable Energy Certificate: Evidence from Taiwan Market (T-REC)

Under the revision of energy regulations in Taiwan, the “Energy-heavy Industries terms” has been officially introduced to develop the renewable energy certificate market. However, the special market design makes energy-heavy industries become potential suppliers of renewable energy certificates, and the supply of energy certificates is inextricably linked with system power generation. Therefore, the contribution of this paper is to develop a generation model that includes two real factors: sunshine hours and module temperature, and through the mean-reverting process with seasonal mean and variance (MR-SM-SV), the model will be able to capture seasonal variation and compare with historical generation to confirm that it is realistic and better than the generation models used in the past literature.
Furthermore, this study derives the optimal proportion for energy-heavy industries to allocate towards purchasing conventional electricity, renewable energy, and setting up renewable energy systems under the condition of utility maximization. Additionally, considering the maximization of profits for conventional and renewable energy producers, along with market clearing conditions, the relationship between renewable energy certificates and energy prices is derived. This aims to increase market transparency, promote active market trading, and facilitate a fair assessment of the value of power generation systems. Ultimately, these efforts aim to drive the development of the sustainable energy market and align it with international standards.