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When energy storage reduces social welfare

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  • Sioshansi, Ramteen

Abstract

This paper examines the potential welfare effects of storage under different market structures. This includes combinations of perfectly competitive and strategic generation and storage sectors, and standalone and generator-owned storage. We demonstrate that if the generation sector is perfectly competitive and does not own storage, then storage cannot be welfare-diminishing. Otherwise, generator-owned storage or standalone storage in a market with strategic generating firms can reduce welfare compared to the no-storage case. This contradicts conventional wisdom that adding firms to an imperfectly competitive market typically reduces welfare losses.

Suggested Citation

  • Sioshansi, Ramteen, 2014. "When energy storage reduces social welfare," Energy Economics, Elsevier, vol. 41(C), pages 106-116.
    • Handle: RePEc:eee:eneeco:v:41:y:2014:i:c:p:106-116
    DOI: 10.1016/j.eneco.2013.09.027
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    References listed on IDEAS

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    8. Sioshansi, Ramteen & Denholm, Paul & Jenkin, Thomas, 2011. "A comparative analysis of the value of pure and hybrid electricity storage," Energy Economics, Elsevier, vol. 33(1), pages 56-66, January.
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    Keywords

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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D6 - Microeconomics - - Welfare Economics
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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