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Energy Storage Investment and Operation in Efficient Electric Power Systems

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  • Cristian Junge
  • Dharik Mallapragada
  • Richard Schmalensee

Abstract

We consider welfare-optimal investment in and operation of electric power systems with constant returns to scale in multiple available generation and storage technologies under perfect foresight. We extend a number of classic results on generation, derive conditions for investment and operations of storage technologies described by seven cost/performance parameters, and develop insights on power systems with multiple storage technologies. Simulation of a deeply decarbonized “Texas-like†power system with two available storage technologies shows both the non-existence of simple “merit-order†rules for storage operation and the value of frequency domain analysis to describe efficient operation. Our analysis points to the critical role of the capital cost of energy storage capacity in influencing efficient storage investment and operation.

Suggested Citation

  • Cristian Junge & Dharik Mallapragada & Richard Schmalensee, 2022. "Energy Storage Investment and Operation in Efficient Electric Power Systems," The Energy Journal, , vol. 43(6), pages 1-24, November.
    • Handle: RePEc:sae:enejou:v:43:y:2022:i:6:p:1-24
    DOI: 10.5547/01956574.43.6.cjun
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    References listed on IDEAS

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    3. Paul L Joskow, 2019. "Challenges for wholesale electricity markets with intermittent renewable generation at scale: the US experience," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 35(2), pages 291-331.
    4. Joskow, Paul L., 2008. "Capacity payments in imperfect electricity markets: Need and design," Utilities Policy, Elsevier, vol. 16(3), pages 159-170, September.
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