Storing Power: Market Structure Matters

Natalia Fabra and Andrés-Cerezo, David

No 15444, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We assess 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 understanding how to regulate energy storage, an issue which is critical for the deployment of renewables.

Keywords: Storage; Electricity; Market structure; investment (search for similar items in EconPapers)
JEL-codes: L22 L94 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-com, nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Storing power: market structure matters (2023)
Working Paper: Storing Power: Market Structure Matters (2020)
Working Paper: Storing Power: Market Structure Matters (2020)
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