Welfare effects of grid-scale energy storage
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Bachelor's thesis
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Date
2024
Department
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Mcode
Degree programme
Bachelor’s programme in Economics
Language
en
Pages
24+5
Series
Abstract
This thesis employs a comprehensive literature review to assess the social costs and benefits that arise when grid-scale energy storage systems are implemented into electricity markets. As electricity production transitions towards renewables, interest has grown towards energy storage which could counteract the intermittency of wind and solar power sources. This thesis has uncovered significant potential welfare gains associated with storage deployment such as gains to producer and consumer surplus, as well as broader societal level benefits such as enabling the integration of additional renewable energy capacity, decreasing carbon emissions and improving the security of electricity supply. A separate question is who owns the storage system: most efficient equilibrium outcomes occur when storage operates competitively while market power among storage operators distorts the welfare gains and could even be welfare diminishing. The amount of literature in this field is limited, but this will likely change as manufacturing costs for batteries decrease, enabling their broader adoption in the electricity grid. Effects of storage on total market surplus as well as the effect market power are covered well in current literature. On the other hand, emphasising the broader transmission system wide welfare effects, such as how a storage system effects energy security, could be valuable prospects for future studies.Description
Thesis advisor
Vehviläinen, IivoKeywords
energy storage, welfare, renewable energy, private costs and benefits, external costs and benefits