Green Manufacturers’ Power Strategy in the Smart Grid Era

Posted: 24 May 2021

See all articles by Baozhuang Niu

Baozhuang Niu

School of Business Administration, South China University of Technology; School of Business Administration, South China University of Technology

jian dong

South China University of Technology - School of Business Administration (SBA)

Fanzhuo Zeng

South China University of Technology - School of Business Administration (SBA)

Date Written: May 19, 2021

Abstract

Conventional electricity generation from coal and natural gas is one of the largest greenhouse gas sources and using wind power is an effective way to achieve climate neutrality. Realizing this, green manufacturers such as SC Johnson and Silk decide to use 100% wind power for their manufacture. This enables the manufacturers to receive green certifications and hence, attract more customers. However, wind power can be instable, so some green manufacturers like New Belgium Brewing purchase power from both the regular power supplier and the wind power supplier, resulting in a discount of market expansion and the green manufacturers’ self-competition by selling both green and regular products. We therefore build a stylized model comprising of a wind power supplier, a regular power supplier and a green manufacturer to examine whether the green manufacturer is more benefited under all-wind power strategy. We find that the green manufacturer prefers all-wind power strategy when (a) the discount effect is significant and the market potential is greatly expanded; (b) both the discount effect and the market expansion are moderate. We further study the impact of the environmental effect and the improvement of wind power stability, finding that the main results are qualitatively unchanged.

Keywords: Wind power; Energy procurement; Green operations; Power stability; Dual sourcing.

JEL Classification: M11

Suggested Citation

Niu, Baozhuang and dong, jian and Zeng, Fanzhuo, Green Manufacturers’ Power Strategy in the Smart Grid Era (May 19, 2021). Available at SSRN: https://ssrn.com/abstract=3849341

Baozhuang Niu

School of Business Administration, South China University of Technology ( email )

Wushan
Guangzhou
China

School of Business Administration, South China University of Technology ( email )

381, Wushan Road
Tianhe
Guangzhou, NY Guangzhou 510275
China

Jian Dong

South China University of Technology - School of Business Administration (SBA) ( email )

Wushan
Guangzhou
China

Fanzhuo Zeng (Contact Author)

South China University of Technology - School of Business Administration (SBA) ( email )

Wushan
Guangzhou
China

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