Strategic storage and fluctuating wind power in a game-theoretic electricity market model with imperfect competition

In this paper, we develop the game-theoretic electricity market model ElStorM that includes the possibility of strategic electricity storage. We apply the model to the German electricity market and analyze different realistic and counterfactual cases of strategic and non-strategic pumped hydro storage utilization by different players. We find that the utilization of storage capacities depends on the opera-tor and its ability to exert market power both regarding storage and conventional generation capacities. The distribution of storage capacities among players also mat-ters. A general finding is that strategic operators tend to under-utilize their storage capacities. This affects generation patterns of conventional technologies and mar-ket outcomes. Strategic under-utilization of storage capacities might also diminish their potential for renewable energy integration. Accordingly, economic regulation of existing and future storage capacities may be necessary, depending on policy ob-jectives. We also find that the introduction of electricity storage generally increases overall welfare, while outcomes vary between different cases. Interestingly, if storage is distributed among several players, consumers may be better off if these players utilize their storage capacities strategically compared to non-strategic storage oper-ation, since market prices in storage loading periods are lower