This paper presents a game theory-based modeling framework for government subsidy optimization and renewable multi-energy system (MES) design. The government offers subsidy for renewable technologies, while consumers return rational response to government subsidy on deploying renewable technologies in their respective MES. The game theory-based subsidy optimization and MES design is first formulated as a mixed-integer bilevel nonlinear programming problem and then transformed into a single level mixed-integer linear programming problem using Karush-Kuhn-Tucker conditions and linearization strategies. The results show that the government needs to provide a total subsidy of 3.86 million USD in order to achieve a renewable penetration of 60% in a small urban city composed of four towns. With government subsidy, the total net present costs for the four towns are 8.24, 6.7, 8.32, and 8.93 million USD, respectively.
Keywords Multi-energy system, Renewable energy, Incentive strategy, Game theory, Bilevel optimization