The Effect of Market Power on Electricity Storage Utilization: The Case of Pumped Hydro Storage in Germany
Publikation: Arbeits- oder Diskussionspapiere und Berichte › Arbeits- oder Diskussionspapiere
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Berlin: Deutsches Institut für Wirtschaftsforschung (DIW), 2010. (DIW Discussion Papers; Nr. 947).
Publikation: Arbeits- oder Diskussionspapiere und Berichte › Arbeits- oder Diskussionspapiere
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RIS
TY - UNPB
T1 - The Effect of Market Power on Electricity Storage Utilization
T2 - The Case of Pumped Hydro Storage in Germany
AU - Schill, Wolf-Peter
AU - Kemfert, Claudia
PY - 2010
Y1 - 2010
N2 - We develop a game-theoretic electricity market model that allows analyzing strategic electricity storage in an imperfect market setting. We apply the model to Germany and examine different cases of strategic and non-strategic pumped hydro storage operation. We find that introducing storage generally smoothes conventional generation patterns and market prices and increases consumer rent and overall welfare. In contrast, electricity producers generally suffer from storage. We also find that the utilization of storage capacities depends on their operator's ability to exert market power both regarding storage and conventional generation. In particular, strategic operators tend to under-utilize their storage capacities, which in turn has welfare implications. The distribution of storage among players also matters. Accordingly, economic regulation of existing and future storage capacities may be necessary.
AB - We develop a game-theoretic electricity market model that allows analyzing strategic electricity storage in an imperfect market setting. We apply the model to Germany and examine different cases of strategic and non-strategic pumped hydro storage operation. We find that introducing storage generally smoothes conventional generation patterns and market prices and increases consumer rent and overall welfare. In contrast, electricity producers generally suffer from storage. We also find that the utilization of storage capacities depends on their operator's ability to exert market power both regarding storage and conventional generation. In particular, strategic operators tend to under-utilize their storage capacities, which in turn has welfare implications. The distribution of storage among players also matters. Accordingly, economic regulation of existing and future storage capacities may be necessary.
KW - Economics
KW - Electric Power Markets
KW - Storage
KW - Market Power
KW - Nash-Cournot
M3 - Working papers
T3 - DIW Discussion Papers
BT - The Effect of Market Power on Electricity Storage Utilization
PB - Deutsches Institut für Wirtschaftsforschung (DIW)
CY - Berlin
ER -