STOCHASTIC ENERGY DEMAND AND THE STABILIZATION VALUE OF ENERGY STORAGE

Yacov Tsur and Amos Zemel

No 14267, Staff Papers from University of Minnesota, Department of Applied Economics

Abstract: The economic value of energy storage to meet peak electricity demand is analyzed with an emphasis on the role of demand uncertainty. The concept of the stabilization value, which measures that part of the benefit of the storage project which is due solely to the stochastic demand components, is defined. The magnitude of the stabilization value, relative to the overall value of energy storage, is evaluated in terms of a simple model that accounts for the relevant characteristics of the electric power utility's production mix. It is found that neglecting the demand uncertainty can seriously bias the benefit assessment of the storage project as well as the determination of the optimal storage capacity.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 15
Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umaesp:14267

DOI: 10.22004/ag.econ.14267

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