Economics of Grid-Scale Energy Storage in Wholesale Electricity Market I Omer Karaduman I Smart Grid

The transition to a low-carbon electricity system is likely to require grid-scale energy storage to smooth the variability and intermittency of renewable energy. In a wholesale electricity market, energy storage systems generate profit by arbitraging inter-temporal electricity price differences. In addition, storage induces non-pecuniary externalities due to production efficiency and carbon emissions. I investigate whether private incentives for operating and investing in grid-scale energy storage are optimal and the need for policies that complement investments in renewables with encouraging energy storage. I build a new dynamic structural equilibrium framework to quantify the effects of grid-scale energy storage and apply it to study the South Australian Electricity Market.