An analysis of a feed-in tariff in Taiwan's electricity market

For the earth's sustainable development, the proportion of power generated by renewable resources has risen, whereas the proportion of power generated by fossil fuel has fallen. Many small-sized power plants that generate power through renewable resources sell power to large-size traditional power plants that generate power using fossil fuel. In this study we employ the Stackelberg framework to analyze the feed-in tariff (FIT) regime in which a traditional power plant purchases power from a small-size green power plant. We conclude that such a FIT regime causes social welfare to decrease when the marginal cost of the public power plant decreases and the public power plant purchases too much renewable power. (C) 2012 Published by Elsevier Ltd.