Optimal storage under uncertainty: investigating the implications of frugality and prudence

Tunç Durmaz

Economics Bulletin, 2017, vol. 37, issue 3, 1624-1629

Abstract: I investigate the effects of a convex marginal cost (frugality) and a convex marginal utility (prudence) on energy storage using a simple theoretical model. By characterizing the optimum, I show that prudence and frugality spur precautionary energy storage, and explain the implications of the results for a competitive market equilibrium. The analysis can be of significance for storage decisions in various industries where firms are exposed to production risks. Thus, its scope of application is not limited to the energy markets.

Keywords: Precautionary storage; Uncertainty; Renewable energy; Prudence; Frugality (search for similar items in EconPapers)
JEL-codes: D8 Q4 (search for similar items in EconPapers)
Date: 2017-07-16
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I3-P149.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-17-00289

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().