2013 Volume 6 Issue 1 Pages 41-52
Feed in tariff (FIT) is one of the major instruments for promoting renewable electricity in power market. Electric utility companies are obligated to purchase electricity from renewable power sources for a certain period at a fixed price. Effectiveness of the policy has been intensively evaluated by many EU countries, and the Japanese government started to examine the potential of FIT systems in Japan in November 2009. In this paper, the regular FIT system for the Japanese environment is modeled and yearly optimal purchase prices, minimizing the social cost to achieve the installation target both for PV and wind power, are derived. In this multi-period optimization, dynamic marginal-cost curves for PV as well as wind power are used to estimate the additional quantity of electricity produced by renewable power sources that becomes available in the power market every year. The marginal-cost curves will be revised every year according to the learning effect of the power systems. The model is assumed to be a state transition process and dynamic programming has been adopted for optimization.
