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Modeling Strategic Electricity Storage: The Case of Pumped Hydro Storage in Germany

Aufsätze referiert extern - Web of Science

Wolf-Peter Schill, Claudia Kemfert

In: The Energy Journal 32 (2011), 3, S. 59-87


We study the strategic utilization of storage in imperfect electricity markets. We apply a game-theoretic Cournot model to the German power market and analyze different counterfactual and realistic cases of pumped hydro storage. Our main finding is that both storage utilization and storage-related welfare effects depend on storage ownership and the operator's involvement in conventional generation. Strategic operators generally under-utilize owned storage capacity. Strategic storage operation may also lead to welfare losses, in particular if the total storage capacity is controlled by an oligopolistic generator that also owns conventional generation capacity. Yet in the current German situation, pumped hydro storage is not a relevant source of market power.

Wolf-Peter Schill

Head of the research area „Transformation of the Energy Economy“ in the Energy, Transportation, Environment Department

Claudia Kemfert

Head of Department in the Energy, Transportation, Environment Department