We present a bilevel optimization approach to designing effective and efficient incentive policies for promoting renewable energy. The effectiveness of an incentive policy is its capability to achieve a goal that would not be achievable without it. Renewable

portfolio standard is used in this thesis as the policy goal. The efficiency of an incentive policy is measured by the amount of intervention, such as taxes collected and subsidies

paid, to achieve the policy goal. We obtain the most effective and efficient incentive policies in the context of generation expansion planning, in which a planner makes investment decisions to serve project demand of electricity. A case study is conducted on

an integrated coal and electricity network representing the contiguous United States. Numerical analysis from the case study provides insights on the comparison of various

incentive policies. The sensitivity of the incentive policies with respect to coal production, energy investment costs, and transmission capacity is also studied.