Optimal Design of Renewable Energy Certificate Markets: A Principal-Agent Mean Field Game Approach

Explore a seminar on the optimal design of Renewable Energy Certificate (REC) markets using a Principal-Agent Mean Field Game approach. Delve into the complex dynamics between regulators and power generators, examining how noncompliance penalties influence clean energy production and market behavior. Learn about the application of mean field game techniques to find Nash equilibria among agents and extended McKean-Vlasov control problems to determine optimal penalty functions. Discover how this approach balances environmental impact and revenue generation in REC markets, incorporating market clearing mechanisms and agent heterogeneity. Gain insights into the economic implications of linear penalty functions and their effects on regulated firms' strategies for navigating the REC system.

Introduction
Renewable Energy Certificate (REC) markets
What problem do we address?
Contribution to the literature
Agents' (Regulated Firms) Problem in a Nutshell
Agents' Problem in a Nutshell
Agents' Problem (Mean Field Limit)
Principal's (Regulator's) Problem
Remarks on Approach
Find agents' best response - Overview
Find agents' best response Optimal Controls
Step 1. Agents' best response characterization
Re-cast principal's problem - Overview
Re-cast principal's problem - Reduction
Re-cast principal's problem - Restatement
Solve the re-cast problem - Overview
Solve the re-cast problem - Hamiltonian KY, KY represent adjoint processes, Ly represents
Solve the re-cast problem - Optimal penalty
Economic Implications