IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Efficiency Rents of Storage Plants in Peak-Load Pricing, I: Pumped Storage

  • Anthony Horsley
  • Andrew J Wrobel

Programming methods are given for rental valuation of storage and conversion facilities in cyclical, continuous-time pricing problems, e.g. pumped storage of electricity. By identifying the points of differentiability of the short-run profit function, unique and separate marginal values can be imputed to the different capital inputs, even though these are perfect complements (which, with multiple outputs, does not entail fixed input proportions). The short-run (profit-maximising) operation problem has a dual that gives the shadow prices of the stored intermediate good. Formulae for the quasi-rents are derived in terms of the shadow prices. In particular, the unit reservoir rent is shown to be equal to the total positive variation of the shadow price over the cycle. This is unique if the (given) market price for the final good is continuous over time. The shadow prices also determine the optimal storage policy. It is also shown, by studying input requirement functions, that continuous-time problems of this kind can be incorporated into a model of general competitive equilibrium with the space of bounded functions as the commodity space.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number 301.

in new window

Date of creation: Jan 1996
Date of revision:
Handle: RePEc:cep:stitep:301
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cep:stitep:301. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.