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Pumped storage and cost saving

  • Crampes, Claude
  • Moreaux, Michel

The pump storage technique allows the use of cheap thermal electricity at periods of low demand to restore water resources that can be used to generate electricity at periods of peak demand. When the thermal plant and the hydro plant are managed by the same operator, the two plants are used in an efficient way to substitute low cost fuel for high cost fuel. The paper first analyzes the efficient use of the technology when the outputs at each period are given. We determine the frontier between the storage and no-storage solutions and its sensibility to cost variations. We then determine the optimal dispatch given the intertemporal preferences of electricity consumers. The model gives emphasis to the economic driver of the technology that is the net social gain from transferring social surplus from off peak to peak period.

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File URL: http://www.sciencedirect.com/science/article/B6V7G-4XFPR0X-2/2/efc8e0956144b23b67760eb288d1ac3f
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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 2 (March)
Pages: 325-333

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Handle: RePEc:eee:eneeco:v:32:y:2010:i:2:p:325-333
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  1. Anthony Horsley & Andrew J Wrobel, 2000. "Efficiency Rents of Pumped-Storage Plants and their Uses for Operation and Investment Decisions," STICERD - Theoretical Economics Paper Series 405, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Paul L. Joskow & Jean Tirole, 2004. "Reliability and Competitive Electricity Markets," NBER Working Papers 10472, National Bureau of Economic Research, Inc.
  3. Brian K. Edwards & Silvio J. Flaim & Richard E. Howitt, 1999. "Optimal Provision of Hydroelectric Power under Environmental and Regulatory Constraints," Land Economics, University of Wisconsin Press, vol. 75(2), pages 267-283.
  4. Tjalling C. Koopmans, 1957. "Water Storage Policy in a Simplified Hydroelectric System," Cowles Foundation Discussion Papers 26, Cowles Foundation for Research in Economics, Yale University.
  5. Crampes, C. & Moreaux, M., 2001. "Water resource and power generation," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 975-997, May.
  6. Severin Borenstein & Stephen P. Holland, 2003. "On the Efficiency of Competitive Electricity Markets With Time-Invariant Retail Prices," NBER Working Papers 9922, National Bureau of Economic Research, Inc.
  7. Horsley, Anthony & Wrobel, Andrew J., 2007. "Profit-maximizing operation and valuation of hydroelectric plant: A new solution to the Koopmans problem," Journal of Economic Dynamics and Control, Elsevier, vol. 31(3), pages 938-970, March.
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