Contracts with Aftermarket Substitution: The Case of PG&E and Electric Batteries

52 Pages Posted: 27 Aug 2021

See all articles by Mohammad Rasouli

Mohammad Rasouli

Stanford University

Tao Sun

Stanford University - Department of Civil and Environmental Engineering

Ram Rajagopal

Stanford University

Date Written: August 25, 2021

Abstract

Electric batteries are rapidly growing technologies that allow storing electricity at one time to be used in another. In recent years, many battery companies have entered the market for end-user batteries. These behind-the-meter batteries allow end-users (e.g. households) to store electricity at off-peak prices for use in peak price periods in order to reduce their bills. They also allow arbitrage on retailer's temporal electricity prices. Electricity retailers facing increased use of batteries by end-users should respond by updating their offered prices. By finding the new optimal prices, the retailers would like to understand the impact of end-user battery technology on their surplus.

In this paper, we focus on electricity retailer's optimal electricity pricing considering incentives when batteries are available to the end-users, and study the impact of these batteries on retailer's welfare. We consider an economy consisting of an electricity retailer, and heterogeneous end-users. The retailer buys electricity in the wholesale market and offers contracts to end-users, while the end-users can access behind-the-meter batteries via battery companies. To isolate the impact of batteries, we do not consider access to rooftop solar as alternative source of electricity in this study; in other words, the retailer is a monopolist.

Suggested Citation

Rasouli, Mohammad and Sun, Tao and Rajagopal, Ram, Contracts with Aftermarket Substitution: The Case of PG&E and Electric Batteries (August 25, 2021). Available at SSRN: https://ssrn.com/abstract=3910974 or http://dx.doi.org/10.2139/ssrn.3910974

Mohammad Rasouli

Stanford University ( email )

Stanford, CA 94305
United States

Tao Sun (Contact Author)

Stanford University - Department of Civil and Environmental Engineering ( email )

Stanford, CA 94305
United States

Ram Rajagopal

Stanford University

Stanford, CA 94305
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
13
Abstract Views
59
PlumX Metrics