Speaker: Omer Karaduman from Stanford University
Seminar Abstract: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. 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. 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 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. This equilibrium framework computes a supply function equilibrium using estimated best responses from conventional sources to observe variation in the residual demand volatility. The first set of results shows that although entering the electricity market is not profitable for privately operated storage, such entry would increase consumer surplus and total welfare and reduce emissions. A storage operator that minimizes the cost of acquiring electricity could further improve consumer surplus by twice as much. Notably, a competitive storage market cannot achieve this outcome because other power plants distort prices. The second set of results shows that energy storage decreases inframarginal power plants' revenue, baseloads, more than marginal power plants, peakers. The final set of results shows that introducing grid-scale storage to the system reduces renewable generators' revenue by decreasing average prices at moderate levels of renewable power. However, for high renewable generation capacity levels, storage increases the return to renewable production and decreases CO2 emissions by preventing curtailment during low-demand periods.
Speaker Bio: Omer Karaduman is a Postdoctoral Research Fellow at Bits & Watts Initiative at Stanford University. His research focuses on the transition of the energy sector towards a decarbonized and sustainable future. In his research, he utilizes large datasets by using game-theoretical modeling to have practical policy suggestions. Prior to coming to Stanford, Omer completed his Ph.D. in Economics at MIT in 2020, and got his bachelor's degree in Economics from Bilkent University in 2014.
Seminar is open to all Stanford students, faculty and staff. Register via the RSVP link.