The coordination of pumped hydro storage, electric vehicles, and climate policy in imperfect electricity markets: Insights from China

Abstract

An understanding of how storage technologies coordinate with other power resources to deliver value for electricity market participants in compliance with climate policy will be vital as policy makers seek to decarbonize electricity generation in a cost-effective way. This paper adopts a game-theoretic electricity market model to evaluate the interaction between pumped hydro storage, electric vehicles, and climate policy under a range of assumptions regarding market power and ownership of generation and storage assets. Using data from the Chinese electricity market, it shows that climate policy may not incentivize storage utilization especially when firms that hold a dominant position in storage operation own a limited portfolio of generation assets. In addition, electric vehicles may not improve consumers’ welfare in the presence of pumped hydro storage when perfect competition exists in the market. These results have significant implications for public policy.