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Electricity storage and market power

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  • Williams, Olayinka
  • Green, Richard

Abstract

Electricity storage is likely to be an important factor in balancing fluctuations in renewable generators' output, but concentrated ownership could lead to market power. We model this for short-term (daily) storage in the British electricity wholesale market, with generating companies acting as either price-takers or Cournot competitors. We discuss how competitive storage charging and discharging behaviour depends on the balance between the market price and shadow price of stored electricity. Electricity storage raises welfare, consumer surplus and renewable generators’ revenues, while reducing revenues for conventional generators. Market power in storage slightly reduces the welfare gains; Cournot behaviour by generators reduces welfare but has relatively little impact on the incremental effect of storage. Market power in electricity storage is undesirable, but market power in generation is much worse. The interactions between market power in generation and in storage are complex, suggesting that predictions from one market may not apply elsewhere and context-specific modelling will be valuable.

Suggested Citation

  • Williams, Olayinka & Green, Richard, 2022. "Electricity storage and market power," Energy Policy, Elsevier, vol. 164(C).
    • Handle: RePEc:eee:enepol:v:164:y:2022:i:c:s0301421522000970
    DOI: 10.1016/j.enpol.2022.112872
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    References listed on IDEAS

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    2. Neal Ma & Ningkun Zheng & Ning Qi & Bolun Xu, 2025. "Comparative Withholding Behavior Analysis of Historical Energy Storage Bids in California," Papers 2501.13324, arXiv.org.
    3. Farzad Hassanzadeh Moghimi & Yihsu Chen & Afzal S. Siddiqui, 2023. "Flexible supply meets flexible demand: prosumer impact on strategic hydro operations," Computational Management Science, Springer, vol. 20(1), pages 1-35, December.
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    6. Naeem, Muhammad Abubakr & Arfaoui, Nadia, 2023. "Exploring downside risk dependence across energy markets: Electricity, conventional energy, carbon, and clean energy during episodes of market crises," Energy Economics, Elsevier, vol. 127(PB).
    7. Chen, Huanhuan & Li, Jinke & O'Leary, Nigel & Shao, Jing, 2025. "Higher prices in a more competitive market: The paradox in the retail electricity market in the United Kingdom," Structural Change and Economic Dynamics, Elsevier, vol. 72(C), pages 374-390.
    8. Maticka, Martin J., 2026. "Investment dunkelflautes. Inflection points for transitioning markets," Energy Policy, Elsevier, vol. 208(C).
    9. Feng Wang & Yongxuan Xue, 2025. "A Review of the Development of the Energy Storage Industry in China: Challenges and Opportunities," Energies, MDPI, vol. 18(6), pages 1-21, March.
    10. Topalović, Zejneba & Haas, Reinhard & Sayer, Marlene, 2024. "Economic benefits of PHS and Li-ion storage. Study cases: Austria and Bosnia and Herzegovina," Applied Energy, Elsevier, vol. 362(C).
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    13. Clarisse Dupont & Olga Heijmans-Kuryatnikova & Yashar Ghiassi-Farrokhfal & Derek Bunn, 2026. "The Unintended Carbon Impacts of Large-Scale Electricity Storage," Manufacturing & Service Operations Management, INFORMS, vol. 28(2), pages 663-685, March.

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