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Solar Renewable Energy Certificate (SREC) markets are a market-based systemthat incentivizes solar energy generation. A regulatory body imposes a lowerbound on the amount of energy each regulated firm must generate via solarmeans, providing them with a tradeable certificate for each MWh generated.Firms seek to navigate the market optimally by modulating their SREC generationand trading rates. As such, the SREC market can be viewed as a stochastic game,where agents interact through the SREC price. We study this stochastic game bysolving the mean-field game (MFG) limit with sub-populations of heterogeneousagents. Market participants optimize costs accounting for trading frictions,cost of generation, non-linear non-compliance costs, and generationuncertainty. Moreover, we endogenize SREC price through market clearing. Wecharacterize firms' optimal controls as the solution of McKean-Vlasov (MV)FBSDEs and determine the equilibrium SREC price. We establish the existence anduniqueness of a solution to this MV-FBSDE, and prove that the MFG strategiesform an $\epsilon$-Nash equilibrium for the finite player game. Finally, wedevelop a numerical scheme for solving the MV-FBSDEs and conduct a simulationstudy.

A Mean-Field Game Approach to Equilibrium Pricing in Solar Renewable Energy Certificate Markets