Soaking Up the Sun: Battery Investment, Renewable Energy, and Market Equilibrium

R. Andrew Butters, Jackson Dorsey and Gautam Gowrisankaran

No 29133, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Renewable energy and battery storage are seen as complementary technologies that can together facilitate reductions in carbon emissions. We develop and estimate a framework to calculate the equilibrium effects of large-scale battery storage. Using data from California, we find that the first storage unit breaks even by 2024 without subsidies when the renewable energy share reaches 50%. Equilibrium effects are important: the first 5,000 MWh of storage capacity would reduce wholesale electricity prices by 5.6%, but an increase from 25,000 to 50,000 MWh would only reduce these prices by 2.6%. Large-scale batteries will reduce revenues to both dispatchable generators and renewable energy sources. The equilibrium effects lead battery adoption to be virtually non-existent until 2030, without a storage mandate or subsidy. A 30% capital cost subsidy—such as the one in the U.S. Inflation Reduction Act—achieves 5,000 MWh of battery capacity by 2024, similar to the level required under California’s storage mandate.

JEL-codes: L94 Q40 Q48 Q55 (search for similar items in EconPapers)
Date: 2021-08
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-isf
Note: EEE IO
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Citations: View citations in EconPapers (14)

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