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Tunç Durmaz
''"Optimal storage under uncertainty: investigating the implications of frugality and prudence."''
( 2017, Vol. 37 No.3 )
I investigate the effects of a convex marginal cost (frugality) and a convex marginal utility (prudence) on energy storage using a simple theoretical model. By characterizing the optimum, I show that prudence and frugality spur precautionary energy storage, and explain the implications of the results for a competitive market equilibrium. The analysis can be of significance for storage decisions in various industries where firms are exposed to production risks. Thus, its scope of application is not limited to the energy markets.
Keywords: Precautionary storage, Uncertainty, Renewable energy, Prudence, Frugality
JEL: D8 - Information, Knowledge, and Uncertainty: General
Q4 - Energy: General
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Manuscript Received : Apr 15 2017 Manuscript Accepted : Jul 16 2017

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