When energy storage reduces social welfare

Ramteen Sioshansi

Energy Economics, 2014, vol. 41, issue C, 106-116

Abstract: This paper examines the potential welfare effects of storage under different market structures. This includes combinations of perfectly competitive and strategic generation and storage sectors, and standalone and generator-owned storage. We demonstrate that if the generation sector is perfectly competitive and does not own storage, then storage cannot be welfare-diminishing. Otherwise, generator-owned storage or standalone storage in a market with strategic generating firms can reduce welfare compared to the no-storage case. This contradicts conventional wisdom that adding firms to an imperfectly competitive market typically reduces welfare losses.

Keywords: Energy storage; Market structure; Arbitrage; Social welfare (search for similar items in EconPapers)
JEL-codes: C61 C72 D4 D6 Q4 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:41:y:2014:i:c:p:106-116

DOI: 10.1016/j.eneco.2013.09.027

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