Storing Power: Markets Structure Matters Articles uri icon

publication date

  • February 2023

start page

  • 3

end page

  • 53

issue

  • 1

volume

  • 54

International Standard Serial Number (ISSN)

  • 0741-6261

Electronic International Standard Serial Number (EISSN)

  • 1756-2171

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. The results are key to understanding how to regulate energy storage, an issue which is critical for the deployment of renewable energies.

subjects

  • Economics