IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v45y2024i2p1-21.html

Carbon-free Electricity Supply in a Cournot Wholesale Market: Israel

Author

Listed:
  • Irena Milstein
  • Asher Tishler
  • Chi-Keung Woo

Abstract

We develop a two-stage model to analyze a Cournot wholesale electricity market in which competing firms use photovoltaics augmented with batteries (PVB) or combined cycle gas turbines (CCGTs) to meet time-varying demands. Capturing the complex interactions of output and investment decisions made by multiple profit-maximizing PVB and CCGT firms, our model yields the market’s long-run equilibrium of capacity mix and short-run equilibrium of electricity generation and price levels. Accounting for the sun’s irradiation that determines solar generation level, our model computes the battery cost reduction necessary for batteries entering the optimal capacity mix. Using Israel as a case study, we show how declining battery cost may cause PVB firms to displace CCGT firms, resulting in carbon-free electricity supply as a market-based outcome. The battery cost threshold initiating this outcome is ~24% of CCGT’s capacity cost, implying that natural gas is a transitional fuel in Israel’s pathway to deep decarbonization.

Suggested Citation

  • Irena Milstein & Asher Tishler & Chi-Keung Woo, 2024. "Carbon-free Electricity Supply in a Cournot Wholesale Market: Israel," The Energy Journal, , vol. 45(2), pages 1-21, March.
    • Handle: RePEc:sae:enejou:v:45:y:2024:i:2:p:1-21
    DOI: 10.5547/01956574.45.2.imil
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.45.2.imil
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.45.2.imil?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Milstein, Irena & Tishler, Asher, 2015. "Can price volatility enhance market power? The case of renewable technologies in competitive electricity markets," Resource and Energy Economics, Elsevier, vol. 41(C), pages 70-90.
    2. 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).
    3. repec:aen:journl:ej41-2-green is not listed on IDEAS
    4. Brand, Christian & Anable, Jillian & Ketsopoulou, Ioanna & Watson, Jim, 2020. "Road to zero or road to nowhere? Disrupting transport and energy in a zero carbon world," Energy Policy, Elsevier, vol. 139(C).
    5. repec:aen:journl:ej39-1-newbery is not listed on IDEAS
    6. Khan, Agha Salman M. & Verzijlbergh, Remco A. & Sakinci, Ozgur Can & De Vries, Laurens J., 2018. "How do demand response and electrical energy storage affect (the need for) a capacity market?," Applied Energy, Elsevier, vol. 214(C), pages 39-62.
    7. Traber, Thure, 2017. "Capacity Remuneration Mechanisms for Reliability in the Integrated European Electricity Market: Effects on Welfare and Distribution through 2023," Utilities Policy, Elsevier, vol. 46(C), pages 1-14.
    8. repec:aen:journl:ej40-2-huang is not listed on IDEAS
    9. Engels, Jonas & Claessens, Bert & Deconinck, Geert, 2019. "Techno-economic analysis and optimal control of battery storage for frequency control services, applied to the German market," Applied Energy, Elsevier, vol. 242(C), pages 1036-1049.
    10. Mousavian, Seyedamirabbas & Conejo, Antonio J. & Sioshansi, Ramteen, 2020. "Equilibria in investment and spot electricity markets: A conjectural-variations approach," European Journal of Operational Research, Elsevier, vol. 281(1), pages 129-140.
    11. Navon, Aviad & Kulbekov, Pavel & Dolev, Shahar & Yehuda, Gil & Levron, Yoash, 2020. "Integration of distributed renewable energy sources in Israel: Transmission congestion challenges and policy recommendations," Energy Policy, Elsevier, vol. 140(C).
    12. He, Qiao-Chu & Yang, Yun & Bai, Lingquan & Zhang, Baosen, 2020. "Smart energy storage management via information systems design," Energy Economics, Elsevier, vol. 85(C).
    13. Sani Hassan, Abubakar & Cipcigan, Liana & Jenkins, Nick, 2017. "Optimal battery storage operation for PV systems with tariff incentives," Applied Energy, Elsevier, vol. 203(C), pages 422-441.
    14. David Newbery, 2016. "A simple introduction to the economics of storage: shifting demand and supply over time and space," Working Papers EPRG 1626, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    15. Weiss, Olga & Bogdanov, Dmitry & Salovaara, Kaisa & Honkapuro, Samuli, 2017. "Market designs for a 100% renewable energy system: Case isolated power system of Israel," Energy, Elsevier, vol. 119(C), pages 266-277.
    16. Dietrich, Andreas & Weber, Christoph, 2018. "What drives profitability of grid-connected residential PV storage systems? A closer look with focus on Germany," Energy Economics, Elsevier, vol. 74(C), pages 399-416.
    17. repec:aen:journl:ej39-2-burke is not listed on IDEAS
    18. Bernstein, Ronald & Madlener, Reinhard, 2015. "Short- and long-run electricity demand elasticities at the subsectoral level: A cointegration analysis for German manufacturing industries," Energy Economics, Elsevier, vol. 48(C), pages 178-187.
    19. Debia, Sébastien & Pineau, Pierre-Olivier & Siddiqui, Afzal S., 2019. "Strategic use of storage: The impact of carbon policy, resource availability, and technology efficiency on a renewable-thermal power system," Energy Economics, Elsevier, vol. 80(C), pages 100-122.
    20. Woo, C.K. & Chen, Y. & Olson, A. & Moore, J. & Schlag, N. & Ong, A. & Ho, T., 2017. "Electricity price behavior and carbon trading: New evidence from California," Applied Energy, Elsevier, vol. 204(C), pages 531-543.
    21. Baiardi, Donatella, 2020. "Do sustainable energy policies matter for reducing air pollution?," Energy Policy, Elsevier, vol. 140(C).
    22. Krishnamurthy, Chandra Kiran B. & Kriström, Bengt, 2015. "A cross-country analysis of residential electricity demand in 11 OECD-countries," Resource and Energy Economics, Elsevier, vol. 39(C), pages 68-88.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kang Hua Cao & Han Steffan Qi & Chi-Keung Woo & Jay William Zarnikau & Raymond Li, 2025. "Prudent Electricity Procurement by a Load Serving Entity," Energies, MDPI, vol. 18(3), pages 1-16, February.
    2. Tourgeman, Miriam & Cohen, Chen & Rubin, Ofir, 2024. "Preserving competition and economic welfare in Israel's PV market," Utilities Policy, Elsevier, vol. 91(C).
    3. Kang Hua Cao & Han Qi & Chi-Keung Woo & Jay Zarnikau & Raymond Li, 2024. "Efficient Frontiers for Short-term Sales of Spot and Forward Wind Energy in Texas," The Energy Journal, , vol. 45(6), pages 37-60, November.
    4. Milstein, I. & Tishler, A. & Woo, C.K., 2024. "The effect of PV generation's hourly variations on Israel's solar investment," Energy Economics, Elsevier, vol. 136(C).
    5. Milstein, I. & Tishler, A. & Woo, C.K., 2025. "Modeling the effects of photovoltaic technology, battery storage, and electric vehicles on Israel's electricity market from 2030 to 2050," Utilities Policy, Elsevier, vol. 95(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Milstein, I. & Tishler, A. & Woo, C.K., 2025. "Modeling the effects of photovoltaic technology, battery storage, and electric vehicles on Israel's electricity market from 2030 to 2050," Utilities Policy, Elsevier, vol. 95(C).
    2. Milstein, Irena & Tishler, Asher & Woo, Chi-Keung, 2022. "Wholesale electricity market economics of solar generation in Israel," Utilities Policy, Elsevier, vol. 79(C).
    3. Milstein, I. & Tishler, A. & Woo, C.K., 2024. "The effect of PV generation's hourly variations on Israel's solar investment," Energy Economics, Elsevier, vol. 136(C).
    4. Milstein, Irena & Tishler, Asher, 2019. "On the effects of capacity payments in competitive electricity markets: Capacity adequacy, price cap, and reliability," Energy Policy, Elsevier, vol. 129(C), pages 370-385.
    5. Nina Munzke & Felix Büchle & Anna Smith & Marc Hiller, 2021. "Influence of Efficiency, Aging and Charging Strategy on the Economic Viability and Dimensioning of Photovoltaic Home Storage Systems," Energies, MDPI, vol. 14(22), pages 1-46, November.
    6. Jessica Thomsen & Christoph Weber, "undated". "How the design of retail prices, network charges, and levies affects profitability and operation of small-scale PV-Battery Storage Systems," EWL Working Papers 1903, University of Duisburg-Essen, Chair for Management Science and Energy Economics.
    7. Biggar, Darryl R. & Hesamzadeh, Mohammad Reza, 2025. "The capacity market debate: What is the underlying market failure?," Utilities Policy, Elsevier, vol. 95(C).
    8. Adom, Philip Kofi, 2017. "The long-run price sensitivity dynamics of industrial and residential electricity demand: The impact of deregulating electricity prices," Energy Economics, Elsevier, vol. 62(C), pages 43-60.
    9. Bublitz, Andreas & Keles, Dogan & Zimmermann, Florian & Fraunholz, Christoph & Fichtner, Wolf, 2018. "A survey on electricity market design: Insights from theory and real-world implementations of capacity remuneration mechanisms," Working Paper Series in Production and Energy 27, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    10. Lorenz, Christian & Bayer, Daniel R. & Pruckner, Marco & Staake, Thorsten & Hopf, Konstantin, 2026. "Do dynamic electricity tariffs change the gains of residential PV-battery systems? A simulation-based evaluation using data from 448 households," Energy Policy, Elsevier, vol. 209(PA).
    11. Yanay Farja & Mariusz Maciejczak, 2021. "Economic Implications of Agricultural Land Conversion to Solar Power Production," Energies, MDPI, vol. 14(19), pages 1-15, September.
    12. Thomaßen, Georg & Redl, Christian & Bruckner, Thomas, 2022. "Will the energy-only market collapse? On market dynamics in low-carbon electricity systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 164(C).
    13. Adom, Philip Kofi, 2016. "Electricity Supply and System losses in Ghana. What is the red line? Have we crossed over?," MPRA Paper 74559, University Library of Munich, Germany, revised 11 Nov 2016.
    14. Andreolli, Francesca & D’Alpaos, Chiara & Moretto, Michele, 2022. "Valuing investments in domestic PV-Battery Systems under uncertainty," Energy Economics, Elsevier, vol. 106(C).
    15. Bublitz, Andreas & Keles, Dogan & Zimmermann, Florian & Fraunholz, Christoph & Fichtner, Wolf, 2019. "A survey on electricity market design: Insights from theory and real-world implementations of capacity remuneration mechanisms," Energy Economics, Elsevier, vol. 80(C), pages 1059-1078.
    16. Dorothée Charlier & Sondès Kahouli, 2018. "Fuel poverty and residential energy demand: how fuel-poor households react to energy price fluctuations," Post-Print halshs-01957771, HAL.
    17. Iolanda Saviuc & Herbert Peremans & Steven Van Passel & Kevin Milis, 2019. "Economic Performance of Using Batteries in European Residential Microgrids under the Net-Metering Scheme," Energies, MDPI, vol. 12(1), pages 1-28, January.
    18. Østergaard, P.A. & Lund, H. & Thellufsen, J.Z. & Sorknæs, P. & Mathiesen, B.V., 2022. "Review and validation of EnergyPLAN," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    19. Ronald Bernstein & Reinhard Madlener, 2011. "Responsiveness of Residential Electricity Demand in OECD Countries: A Panel Cointegation and Causality Analysis," FCN Working Papers 8/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    20. Sihvonen, Ville & Ollila, Iisa & Jaanto, Jasmin & Grönman, Aki & Honkapuro, Samuli & Riikonen, Juhani & Price, Alisdair, 2024. "Role of power-to-heat and thermal energy storage in decarbonization of district heating," Energy, Elsevier, vol. 305(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:45:y:2024:i:2:p:1-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.