Policy Design for Sustainable Energy Systems Considering Multiple Objectives and Incomplete Preferences

The focus of this paper is on policy design problems related to large scale complex systems such as the decentralized energy infrastructure. In such systems, the policy affects the technical decisions made by stakeholders (e.g., energy producers), and the stakeholders are coordinated by market mechanisms. The decentralized decisions of the stakeholders affect the sustainability of the overall system. Hence, appropriate design of policies is an important aspect of achieving sustainability. The state-of-the-art computational approach to policy design problem is to model them as bilevel programs, specifically mathematical programs with equilibrium constraints. However, this approach is limited to single-objective policy design problems and is based on the assumption that the policy designer has complete information of the stakeholders’ preferences. In this paper, we take a step towards addressing these two limitations. We present a formulation based on the integration of multi-objective mathematical programs with equilibrium constraints with games with vector payoffs, and Nash equilibra of games with incomplete preferences. The formulation, along with a simple solution approach, is presented using an illustrative example from the design of feed-in-tariff (FIT) policy with two stakeholders. The contributions of this paper include a mathematical formulation of the FIT policy, the extension of computational policy design problems to multiple objectives, and the consideration of incomplete preferences of stakeholders.