Storing Power - Market Structure Matters
Market power in generation or storage affects the storage investment level that is eventually supplied by the market. Vertical integration delivers the worst outcome. This webinar speaks to competition policy in the storage market and holds particular relevance to Australia, where storage investment is ramping up.
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. We illustrate our theoretical results by simulating the Spanish wholesale electricity market for different levels of storage capacity. The results are key to understanding how to regulate energy storage, an issue which is critical for the deployment of renewables. Read the paper here.
Speaker
Professor Natalia Fabra, Charles III University of Madrid, Spain
Natalia Fabra is professor of Economics at Universidad Carlos III de Madrid and the Head of EnergyEcoLab. Natalia works in the field of industrial organisation, with emphasis on energy and environmental economics, and regulation and competition policy. In 2014, she was awarded the Sabadell-Herrero Prize for the Best Young Spanish Economist.
Event host
Associate Professor Guillaume Roger, Centre for Global Business (CGB), Monash Business School
A/Professor Roger is the founder and coordinator of the Australian Energy Markets Initiative (AEMI), which was introduced by CGB to spur academic research, policy formulation and industry engagement in the electricity sector in Australia. Guillaume also holds appointments as an Associate Director of the Monash Energy Institute and a Co-Director of the Grid Innovation Hub. His research focuses on incentive design and dynamic contracts under moral hazard and has been published in top field journals in economic theory.
Organised by
Centre for Global Business’ (CGB) Australian Energy Market Initiative (AEMI) (Monash Business School) and the Monash Energy Institute (MEI).
Event Details
- Date:
- 28 April 2021 at 4:30 pm – 5:30 pm
- Venue:
- Online - Melbourne time
- Categories:
- Global Business
Description
Market power in generation or storage affects the storage investment level that is eventually supplied by the market. Vertical integration delivers the worst outcome. This webinar speaks to competition policy in the storage market and holds particular relevance to Australia, where storage investment is ramping up.
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. We illustrate our theoretical results by simulating the Spanish wholesale electricity market for different levels of storage capacity. The results are key to understanding how to regulate energy storage, an issue which is critical for the deployment of renewables. Read the paper here.
Speaker
Professor Natalia Fabra, Charles III University of Madrid, Spain
Natalia Fabra is professor of Economics at Universidad Carlos III de Madrid and the Head of EnergyEcoLab. Natalia works in the field of industrial organisation, with emphasis on energy and environmental economics, and regulation and competition policy. In 2014, she was awarded the Sabadell-Herrero Prize for the Best Young Spanish Economist.
Event host
Associate Professor Guillaume Roger, Centre for Global Business (CGB), Monash Business School
A/Professor Roger is the founder and coordinator of the Australian Energy Markets Initiative (AEMI), which was introduced by CGB to spur academic research, policy formulation and industry engagement in the electricity sector in Australia. Guillaume also holds appointments as an Associate Director of the Monash Energy Institute and a Co-Director of the Grid Innovation Hub. His research focuses on incentive design and dynamic contracts under moral hazard and has been published in top field journals in economic theory.
Organised by
Centre for Global Business’ (CGB) Australian Energy Market Initiative (AEMI) (Monash Business School) and the Monash Energy Institute (MEI).