IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v41y2020i1_supplp215-232.html
   My bibliography  Save this article

Pricing and Competition with 100% Variable Renewable Energy and Storage

Author

Listed:
  • Tommi Ekholm
  • Vilma Virasjoki

Abstract

Electricity production is a key sector in global decarbonization efforts, and variable renewable energy (VRE) technologies are a primary way to produce carbon-free electricity. We study an electricity market where generation is 100% VRE, while storage and elastic demand resolve temporal supply-demand imbalances. We model hourly market equilibrium to analyze price formation and imperfect, Cournot-type competition with varying levels of ownership concentration. Market power is exerted either with storage-only or with both VRE and storage. In such a system, prices are determined dynamically by demand and intertemporal storage decisions, breaking the static logic of “merit order†with dispatch-able generation. The numerical results indicate that market power with storage has a relatively moderate effect on prices and market efficiency. However, market power exerted with VRE has far larger welfare impacts, resulting from curtailed generation. However, such actions could be more readily observed by a regulator via monitoring.

Suggested Citation

  • Tommi Ekholm & Vilma Virasjoki, 2020. "Pricing and Competition with 100% Variable Renewable Energy and Storage," The Energy Journal, , vol. 41(1_suppl), pages 215-232, June.
    • Handle: RePEc:sae:enejou:v:41:y:2020:i:1_suppl:p:215-232
    DOI: 10.5547/01956574.41.SI1.tekh
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.41.SI1.tekh
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.41.SI1.tekh?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Steven A. Gabriel & Antonio J. Conejo & J. David Fuller & Benjamin F. Hobbs & Carlos Ruiz, 2013. "Complementarity Modeling in Energy Markets," International Series in Operations Research and Management Science, Springer, edition 127, number 978-1-4419-6123-5, April.
    2. Child, Michael & Kemfert, Claudia & Bogdanov, Dmitrii & Breyer, Christian, 2019. "Flexible electricity generation, grid exchange and storage for the transition to a 100% renewable energy system in Europe," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 139, pages 80-101.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Awad, Ahmed S.A. & Ahmed, Mohamed Hassan & El-Fouly, Tarek H.M. & Salama, Magdy M.A., 2017. "The impact of wind farm location and control strategy on wind generation penetration and market prices," Renewable Energy, Elsevier, vol. 106(C), pages 354-364.
    2. Megy, Camille & Massol, Olivier, 2023. "Is Power-to-Gas always beneficial? The implications of ownership structure," Energy Economics, Elsevier, vol. 128(C).
    3. Tom Brijs & Daniel Huppmann & Sauleh Siddiqui & Ronnie Belmans, 2016. "Auction-Based Allocation of Shared Electricity Storage Resources through Physical Storage Rights," Discussion Papers of DIW Berlin 1566, DIW Berlin, German Institute for Economic Research.
    4. Iribarren, Diego & Martín-Gamboa, Mario & Navas-Anguita, Zaira & García-Gusano, Diego & Dufour, Javier, 2020. "Influence of climate change externalities on the sustainability-oriented prioritisation of prospective energy scenarios," Energy, Elsevier, vol. 196(C).
    5. Brunner, Christoph & Deac, Gerda & Braun, Sebastian & Zöphel, Christoph, 2020. "The future need for flexibility and the impact of fluctuating renewable power generation," Renewable Energy, Elsevier, vol. 149(C), pages 1314-1324.
    6. Deng, Xu & Lv, Tao & Meng, Xiangyun & Li, Cong & Hou, Xiaoran & Xu, Jie & Wang, Yinhao & Liu, Feng, 2024. "Assessing the carbon emission reduction effect of flexibility option for integrating variable renewable energy," Energy Economics, Elsevier, vol. 132(C).
    7. Savelli, Iacopo & Morstyn, Thomas, 2021. "Electricity prices and tariffs to keep everyone happy: A framework for fixed and nodal prices coexistence in distribution grids with optimal tariffs for investment cost recovery," Omega, Elsevier, vol. 103(C).
    8. Wang, Lu & Gu, Wei & Wu, Zhi & Qiu, Haifeng & Pan, Guangsheng, 2020. "Non-cooperative game-based multilateral contract transactions in power-heating integrated systems," Applied Energy, Elsevier, vol. 268(C).
    9. Bartholdsen, Hans-Karl & Eidens, Anna & Löffler, Konstantin & Seehaus, Frederik & Wejda, Felix & Burandt, Thorsten & Oei, Pao-Yu & Kemfert, Claudia & Hirschhausen, Christian von, 2019. "Pathways for Germany's Low-Carbon Energy Transformation Towards 2050," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 12(15), pages 1-33.
    10. Savelli, Iacopo & De Paola, Antonio & Li, Furong, 2020. "Ex-ante dynamic network tariffs for transmission cost recovery," Applied Energy, Elsevier, vol. 258(C).
    11. Huijia Yang & Weiguang Fan & Guangyu Qin & Zhenyu Zhao, 2021. "A Fuzzy-ANP Approach for Comprehensive Benefit Evaluation of Grid-Side Commercial Storage Project," Energies, MDPI, vol. 14(4), pages 1-17, February.
    12. Johnathon, Chris & Agalgaonkar, Ashish Prakash & Planiden, Chayne & Kennedy, Joel, 2023. "A proposed hedge-based energy market model to manage renewable intermittency," Renewable Energy, Elsevier, vol. 207(C), pages 376-384.
    13. Galván, Antonio & Haas, Jannik & Moreno-Leiva, Simón & Osorio-Aravena, Juan Carlos & Nowak, Wolfgang & Palma-Benke, Rodrigo & Breyer, Christian, 2022. "Exporting sunshine: Planning South America’s electricity transition with green hydrogen," Applied Energy, Elsevier, vol. 325(C).
    14. Debia, Sébastien & Pineau, Pierre-Olivier & Siddiqui, Afzal S., 2021. "Strategic storage use in a hydro-thermal power system with carbon constraints," Energy Economics, Elsevier, vol. 98(C).
    15. Rodica Loisel & Lionel Lemiale & Silvana Mima & Adrien Bidaud, 2022. "Strategies for short-term intermittency in long-term prospective scenarios in the French power system," Post-Print hal-04568072, HAL.
    16. Shaima A. Alnaqbi & Shamma Alasad & Haya Aljaghoub & Abdul Hai Alami & Mohammad Ali Abdelkareem & Abdul Ghani Olabi, 2022. "Applicability of Hydropower Generation and Pumped Hydro Energy Storage in the Middle East and North Africa," Energies, MDPI, vol. 15(7), pages 1-27, March.
    17. Reisi, Mohsen & Gabriel, Steven A. & Fahimnia, Behnam, 2019. "Supply chain competition on shelf space and pricing for soft drinks: A bilevel optimization approach," International Journal of Production Economics, Elsevier, vol. 211(C), pages 237-250.
    18. Misconel, Steffi & Zöphel, Christoph & Möst, Dominik, 2021. "Assessing the value of demand response in a decarbonized energy system – A large-scale model application," Applied Energy, Elsevier, vol. 299(C).
    19. Löschenbrand, Markus, 2020. "Finding multiple Nash equilibria via machine learning-supported Gröbner bases," European Journal of Operational Research, Elsevier, vol. 284(3), pages 1178-1189.
    20. Laxmi Gupta & Ravi Shankar, 2022. "Adoption of Battery Management System in Utility Grid: An Empirical Study Using Structural Equation Modeling," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 23(4), pages 573-596, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:41:y:2020:i:1_suppl:p:215-232. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.