A game-theoretic approach to investigating the negative externalities between renewable and non-renewable energy suppliers under government sustainability goals: A case study of Iran

Abstract

Neglecting the negative externalities in the competition between renewable and non-renewable electricity suppliers results in market failure. This study explores the government's role in mitigating this failure within an electricity market comprising both renewable and non-renewable supply chains, considering various sustainability goals. To this end, the government sets four sustainability goals: maximum revenue, reducing carbon emissions, saving water, and reducing human mortality from air pollution during electricity generation. Under these goals, renewable and non-renewable electricity pricing decisions in a competition between these two supply chains are studied. The government pursues two strategies: (I) Subsidizing consumers of renewable electricity and (II) the expenditure sharing of improving the technology level related to reducing water consumption for the non-renewable supplier. Data is extracted based on the case study of Iran for model validation. The results indicate that government's policy goals significantly impact renewable energy outcomes. Prioritizing water-saving enhances technology upgrades, while optimizing renewable electricity pricing, demand, and supplier profitability. Additionally, our findings suggest that the carbon emission reduction goal yields less favorable results than the water-saving goal.