Document Type

Article

Publication Date

2018

Publication Title

International Journal of Production Research

Volume

56

Issue Number

17

First Page

5723

Last Page

5735

DOI

10.1080/00207543.2017.1394593

Keywords

zero-carbon operations, power purchase agreement, distributed energy resource, sustainable manufacturing, demand response

Disciplines

Operations and Supply Chain Management

Abstract

Integrating renewable energy into the manufacturing facility is the ultimate key to realising carbon-neutral operations. Although many firms have taken various initiatives to reduce the carbon footprint of their facilities, there are few quantitative studies focused on cost analysis and supply reliability of integrating intermittent wind and solar power. This paper aims to fill this gap by addressing the following question: shall we adopt power purchase agreement (PPA) or onsite renewable generation to realise the eco-economic benefits? We tackle this complex decision-making problem by considering two regulatory options: government carbon incentives and utility pricing policy. A stochastic programming model is formulated to search for the optimal mix of onsite and offsite renewable power supply. The model is tested extensively in different regions under various climatic conditions. Three findings are obtained. First, in a long term onsite generation and PPA can avoid the price volatility in the spot or wholesale electricity market. Second, at locations where the wind speed is below 6 m/s, PPA at $70/MWh is preferred over onsite wind generation. Third, compared to PPA and wind generation, solar generation is not economically competitive unless the capacity cost is down below $1.5 M/MW.

Comments

This is the Author's Original Manuscript of an article published by Taylor & Francis in the International Journal of Production Research on 31 March 2017, available online: http://www.tandfonline.com/10.1080/00207543.2017.1394593. SJSU users: use the following link to login and access the article via SJSU databases.

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