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Abstract The carbon emissions trading scheme combined with feed‐in tariff policy is viewed as a feasible policy mix to promote the energy system transferring to low or near‐ zero‐carbon emissions. To investigate the interaction between such policy mix and the diffusion of energy technologies, we establish a stochastic programming model to describe the technology choice between renewable and fossil energy technologies. The uncertain carbon price and “merit order” effect have been introduced in our model. The Kuhn‐Tucker Lagrangian is adopted to derive the model solution and we present several integrals of uncertain carbon prices to analyze the patterns of technologies diffusion, as well as how the electricity price be determined with “merit order” effect. With the model we demonstrated, in a deregulated electricity market with the uncertain carbon price, the diffusion of renewables follows an S‐shaped pattern that is related to the tariff and carbon price levels, and a negative electricity price is possible once the renewables come to dominate the entire market supply. Although there exists a choice related to the low‐carbon technology for the system planner, the room for such technology diffusion can be eliminated as the technology progress of renewables.
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