EURO 2024 Copenhagen
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4149. Large prosumers under capacity constraints: Market power effects of vertical integration and of storage

Invited abstract in session TA-9: Decentralized multi-energy markets, stream Energy Markets.

Tuesday, 8:30-10:00
Room: 10 (building: 116)

Authors (first author is the speaker)

1. Martin Densing
Energy Economics, PSI
2. Yi Wan
PAUL SCHERRER INSTITUT
3. Russell McKenna
Laboratory for Energy Systems Analysis, Paul Scherrer Institute

Abstract

With the advent of batteries and P2X technologies, energy producers can also participate as consumers on energy markets, which increases the flexibility of such prosumers. We consider a single time-step market equilibrium where a large player is an integrated producer and consumer under capacity constraints. The capacity constraints are relevant for emerging consumer-side technologies, such as limited electrolyzer capacity. We use conjectural variations to model different levels of market power, and we solve the model analytically. Under market power, we compare the equilibrium solution with the one for a separated producer and consumer. We calculate corresponding production and consumption equilibrium amounts, prices, and social welfare. The main finding is that the social welfare change of vertical integration is ambiguous and depends on the parameters, for example the limited capacity of the consumption technology.
Using the same analytical method, we consider also a symmetric two time-step duopoly of capaciated storage and production under market power. Also in this case, we show how the equilibrium solution in terms of prices and storage amounts depends on parameters, for example the intensity of market power measured by the conjenctural variation parameter. The findings may be used in energy-policy support to identify different cases for de-bundling energy technology assets.

Keywords

Status: accepted

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