Green Manufacturers’ Power Strategy in the Smart Grid Era
Posted: 24 May 2021
Date Written: May 19, 2021
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: Suggested Citation