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Storing Power: Market Structure Matters

David Andrés-Cerezo and Natalia Fabra

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We asses how firms' incentives to operate and invest in energy storage depend on the market structure. For this purpose, we characterize equilibrium market outcomes allowing for market power in storage and/or production, as well as for vertical integration between storage and production. Market power reduces overall efficiency through two channels: it induces an inefficient use of the storage facilities, and it distorts investment incentives. The worst outcome for consumers and total welfare occurs under vertical integration. We illustrate our theoretical results by simulating the Spanish wholesale electricity market for different levels of storage capacity. The results are key to understand how to regulate energy storage, an issue which is critical for the deployment of renewables.

Keywords: Storage; electricity; market structure; investment; vertical relations (search for similar items in EconPapers)
JEL-codes: L22 L94 (search for similar items in EconPapers)
Date: 2020-12-15
New Economics Papers: this item is included in nep-com, nep-ene, nep-eur, nep-ind and nep-reg
References: Add references at CitEc
Citations: View citations in EconPapers (9)

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http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe20122.pdf

Related works:
Journal Article: Storing power: market structure matters (2023) Downloads
Working Paper: Storing Power: Market Structure Matters (2020) Downloads
Working Paper: Storing Power: Market Structure Matters (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:20122

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