Optimal design of renewable energy certificate multipliers using an LCOE-Integrated AHP model: A case study of South Korea

Abstract

Finding and developing a reasonable design for renewable energy certificate (REC) systems is essential for societies to realize their policy goal of establishing optimal renewable energy portfolios and to minimize the controversy that surrounds REC multipliers. However, it is challenging to assess the adequacy of REC multipliers on a logical and quantitative basis. To fill this gap, we develop a levelized cost of electricity (LCOE)-integrated analytic hierarchy process (AHP) model as a quantitative method for identifying and analyzing appropriate REC multipliers. Our model prioritizes cost-effectiveness and social concerns as the two core factors of consideration in determining REC multipliers, and then quantitatively analyzes each using the LCOE and AHP methods. We also present results of analysis applying the proposed model for the Korean REC market. Our findings reflect the renewable energy market conditions and policy objectives in Korea, while revealing related needs such as the long-term policy objective of ensuring stability of power supply. The Korean government recently revised the REC multipliers adopting the results from our model, and in consideration of overall government policy, the diverse interests of stakeholders, and the need to ensure institutional consistency and market stability.