Game-theoretic modeling shows capacity remuneration outperforms renewable quotas only alongside mature storage, highlighting the need to synchronize decarbonization policy with technology readiness.
Balancing decarbonization with grid reliability requires managing renewable volatility through Renewable Portfolio Standards (RPSs) or Capacity Remuneration Mechanisms (CRMs) alongside carbon emission trading (CET). However, their comparative systemic impacts remain unclear. This study evaluates the strategic equivalence of CET-RPS and CET-CRM regulations using a Stackelberg duopoly model. We endogenize grid-side storage investment and parameterize source-storage synergy to establish a rigorous equivalence mapping anchored in a unified macroeconomic penetration target. The results reveal that the CRM exhibits dual systemic impacts contingent on technological readiness. Immature conditions necessitate excessive capacity prices, inducing speculative over-investment. Conversely, mature synergy creates a substitution effect that efficiently offsets public compensation budgets. Furthermore, the dynamic policy phase boundary demonstrates that stricter decarbonization targets require higher technological readiness for the CRM to dominate the RPS in social welfare. Additionally, imposing stringent administrative capacity derating factors on storage fails to alter its physical deployment, instead unintentionally transferring wealth to conventional high-carbon generators. Regulators must therefore synchronize capacity market deployment with storage technology maturity and adopt dynamic capacity accreditation to prevent such distributional distortions.
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Zhao et al. (2026) studied this question.
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