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The impact of electricity storage on wholesale electricity prices

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  • Nyamdash, Batsaikhan
  • Denny, Eleanor

Abstract

This paper analyzes the impact of electricity storage on the production cost of a power system and the marginal cost of electricity (electricity price) using a unit commitment model. Also, real world data has been analyzed to verify the effect of storage operation on the electricity price using econometric techniques. The unit commitment model found that the deployment of a storage system reduces the fuel cost of the power system but increases the average electricity price through its effect on the power system operation. However, the reduction in the production cost was found to be less than the increase in the consumer's cost of electricity resulting in a net increase in costs due to storage. Different storage and CO2 price scenarios were investigated to study the sensitivity of these results. The regression analysis supports the unit commitment results and finds that the presence of storage increases average wholesale electricity prices for the case study system.

Suggested Citation

  • Nyamdash, Batsaikhan & Denny, Eleanor, 2013. "The impact of electricity storage on wholesale electricity prices," Energy Policy, Elsevier, vol. 58(C), pages 6-16.
    • Handle: RePEc:eee:enepol:v:58:y:2013:i:c:p:6-16
    DOI: 10.1016/j.enpol.2012.11.033
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    4. Kraan, Oscar & Kramer, Gert Jan & Nikolic, Igor & Chappin, Emile & Koning, Vinzenz, 2019. "Why fully liberalised electricity markets will fail to meet deep decarbonisation targets even with strong carbon pricing," Energy Policy, Elsevier, vol. 131(C), pages 99-110.
    5. Jacques Després, 2015. "Development of a dispatch model of the European power system for coupling with a long-term foresight energy model," Working Papers hal-01245554, HAL.
    6. Zorana Božić & Dušan Dobromirov & Jovana Arsić & Mladen Radišić & Beata Ślusarczyk, 2020. "Power Exchange Prices: Comparison of Volatility in European Markets," Energies, MDPI, vol. 13(21), pages 1-15, October.
    7. Jacques Després & Patrick Criqui & Silvana Mima & Nouredine Hadjsaid & Isabelle Noirot, 2014. "Analysing the interactions between Variable Renewable Energies, electricity storage and grid in long term energy modelling tools," Post-Print hal-01279461, HAL.
    8. Tom Brijs & Frederik Geth & Sauleh Siddiqui & Benjamin F. Hobbs & Ronnie Belmans, 2016. "Price-Based Unit Commitment Electricity Storage Arbitrage with Piecewise Linear Price-Effects," Discussion Papers of DIW Berlin 1567, DIW Berlin, German Institute for Economic Research.
    9. Irena Macherinskiene & Inna Kremer Matyskevich, 2017. "Assessment of Lithuanian Energy Sector Influence on GDP," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 13(4), pages 43-59.
    10. Roxana Dumitrescu & Redouane Silvente & Peter Tankov, 2024. "Price impact and long-term profitability of energy storage," Papers 2410.12495, arXiv.org.
    11. Chen, Yang & Hu, Mengqi & Zhou, Zhi, 2017. "A data-driven analytical approach to enable optimal emerging technologies integration in the co-optimized electricity and ancillary service markets," Energy, Elsevier, vol. 122(C), pages 613-626.
    12. Raugei, Marco & Leccisi, Enrica, 2016. "A comprehensive assessment of the energy performance of the full range of electricity generation technologies deployed in the United Kingdom," Energy Policy, Elsevier, vol. 90(C), pages 46-59.
    13. Piotr Kułyk & Łukasz Augustowski, 2021. "Economic Profitability of a Hybrid Approach to Powering Residual Households from Natural Sources in Two Wind Zones of the Lubuskie Voivodeship in Poland," Energies, MDPI, vol. 14(21), pages 1-15, October.
    14. Jacques Després & Patrick Criqui & Silvana Mima & Nouredine Hadjsaid & Isabelle Noirot, 2014. "Variable renewable energies and storage development in long term energy modelling tools," Post-Print hal-01279467, HAL.
    15. Komorowska, Aleksandra & Benalcazar, Pablo & Kaszyński, Przemysław & Kamiński, Jacek, 2020. "Economic consequences of a capacity market implementation: The case of Poland," Energy Policy, Elsevier, vol. 144(C).
    16. Soini, Martin Christoph & Parra, David & Patel, Martin Kumar, 2020. "Does bulk electricity storage assist wind and solar in replacing dispatchable power production?," Energy Economics, Elsevier, vol. 85(C).

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    JEL classification:

    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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