Cleaner energy microgrids under market power and limited regulation in developing countries

Elsa Bou Gebrael, Majd Olleik and Sebastian Zwickl-Bernhard
Additional contact information
Elsa Bou Gebrael: American University of Beirut, Maroun Semaan Faculty of Engineering and Architecture, Industrial Engineering and Management Department Beirut, Lebanon
Majd Olleik: American University of Beirut, Maroun Semaan Faculty of Engineering and Architecture, Industrial Engineering and Management Department Beirut, Lebanon
Sebastian Zwickl-Bernhard: Vienna University of Technology, Institute of Energy Systems and Electrical Drives, Energy Economics Group

Papers from arXiv.org

Abstract: In many low-income countries, neighborhood diesel generators are widely used to compensate for unreliable or unavailable national electricity grids. These diesel-based microgrids are typically characterized by market power, significant pollution, and weak regulatory oversight. In parallel, households increasingly deploy off-grid solar photovoltaic (PV) systems to gain control over electricity supply. However, these systems suffer from curtailed excess generation during peak solar hours and unreliable access at other times. While prior studies have optimized microgrids in developing contexts from a techno-economic perspective, they largely neglect the market power exerted by monopolistic private generators. This paper addresses this gap by developing a bi-level game-theoretic model that enables household-generated electricity to be fed into the microgrid while explicitly accounting for the market power of a neighborhood diesel generator company (DGC). The regulator sets price and feed-in-tariff caps to maximize household economic surplus (HES), while the DGC acts as a profit-maximizing agent controlling access and supply. The model is applied to a Lebanese case study using high-resolution empirical data collected via logging devices. Results show that: (i) price and feed-in-tariff caps substantially increase HES and consistently induce significant household PV feed-in to the microgrid; (ii) higher DGC budgets or greater PV-owner penetration lead to pronounced gains in HES; and (iii) the renewable energy share reaches 60% under base conditions and approaches 100% at sufficiently high budgets or PV-owner penetration levels, compared to 0% under the status quo.

Date: 2026-03
New Economics Papers: this item is included in nep-com and nep-reg
References: Add references at CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2603.16893 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2603.16893

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().