Modeling strategic electricity storage: The case of pumped hydro storage in Germany

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Authors

We study the strategic utilization of storage in imperfect electricity markets. We apply a game-theoretic Cournot model to the German power market and analyze different counterfactual and realistic cases of pumped hydro storage. Our main finding is that both storage utilization and storage-related welfare effects depend on storage ownership and the operator's involvement in conventional generation. Strategic operators generally under-utilize owned storage capacity. Strategic storage operation may also lead to welfare losses, in particular if the total storage capacity is controlled by an oligopolistic generator that also owns conventional generation capacity. Yet in the current German situation, pumped hydro storage is not a relevant source of market power.
Original languageEnglish
JournalEnergy Journal
Volume32
Issue number3
Pages (from-to)59-87
Number of pages29
ISSN0195-6574
DOIs
Publication statusPublished - 2011
Externally publishedYes

    Research areas

  • Economics - electric Power Markets, Storage, Market Power, Nash-Cournot