Does the incentive policy for renewable energy grid connection affect the technical efficiency of power grid companies? Empirical analysis based on China and Japan

Biao Li, Bai-Chen Xie, Xiao-Chen Yu, Zhen-Yu She and Wenhao Hu

Economic Analysis and Policy, 2025, vol. 85, issue C, 28-47

Abstract: The widespread adoption of renewable energy sources, which are characterized by intermittency, uncertainty, and uneven geographical distribution, has significantly influenced power grid operating efficiency. This study employs the meta-frontier model to assess the impact of varying degrees of renewable energy development in China and Japan from 2008 to 2022 on the efficiency of 40 power grid companies. The research reveals that the rapid increase in renewable energy generation has posed significant challenges to grid management, leading to a decline in grid company technical efficiency. Despite implementing entirely different renewable energy incentive policies, both China and Japan have encountered a detrimental effect on the efficiency of their power grids. However, over time, the adverse impact of renewable energy on grid efficiency has shown signs of attenuation. This positive trend is partly attributable to measures such as enhanced infrastructure development and improved technical standards, which have effectively mitigated the negative effects of renewable energy integration on grid operations. Based on these findings, the study emphasizes the importance of bolstering grid infrastructure and fostering technological innovations to minimize the disruptive effects of renewable energy on grid efficiency.

Keywords: Renewable energy; Grid efficiency; Feed-In Tariff; Renewable Portfolio Standard (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:85:y:2025:i:c:p:28-47

DOI: 10.1016/j.eap.2024.11.020

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