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Strategic Policymaking for Implementing Renewable Portfolio Standards: A Tri-level Optimization Approach


Appropriately designed renewable support policies can play a leading role in promoting renewable expansions and contribute to low emission goals. Meanwhile, ill-designed policies may distort electricity markets, put power utilities and generation companies on an unlevel playing field and, in turn, cause inefficiencies. This paper, forthcoming in IEEE Transactions on Power Systems, proposes a framework to optimize policymaking for renewable energy sources, while incorporating conflicting interests and objectives of different stakeholders. We formulate a tri-level optimization problem where each level represents a different entity: a state regulator, a power utility and a wholesale electricity market. To solve this tri-level problem, we exploit optimality conditions and develop a modification of the Column-and-Cut Generation (C&CG) algorithm that generates cuts for bilinear terms. The case study based on the ISO New England 8-zone test system reveals different policy trade-offs that policymakers face under different decarbonization goals and implementation scenarios.