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Modeling Strategic Electricity Storage: The Case of Pumped Hydro Storage in Germany

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  • Wolf-Peter Schill
  • Claudia Kemfert

Abstract

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.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 32 (2011)
Issue (Month): Number 3 ()
Pages: 59-88

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Handle: RePEc:aen:journl:32-3-a03

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Cited by:
  1. Kamiński, Jacek, 2014. "A blocked takeover in the Polish power sector: A model-based analysis," Energy Policy, Elsevier, vol. 66(C), pages 42-52.
  2. Sioshansi, Ramteen, 2014. "When energy storage reduces social welfare," Energy Economics, Elsevier, vol. 41(C), pages 106-116.
  3. Wolf-Peter, Schill, 2011. "Electric vehicles in imperfect electricity markets: The case of Germany," Energy Policy, Elsevier, vol. 39(10), pages 6178-6189, October.
  4. Andreas Schröder & Friedrich Kunz & Jan Meiss & Roman Mendelevitch & Christian von Hirschhausen, 2013. "Current and Prospective Costs of Electricity Generation until 2050," Data Documentation 68, DIW Berlin, German Institute for Economic Research.

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