On the economics of electrical storage for variable renewable energy sources

The use of renewable energy sources is a major strategy to mitigate climate change. Yet Sinn (2017) argues that excessive electrical storage requirements could limit the further expansion of variable wind and solar energy. We question, and alter, strong implicit assumptions of Sinn’s approach and find that storage needs are considerably lower, up to two orders of magnitude. First, we move away from corner solutions by allowing for combinations of storage and renewable curtailment. Second, we specify a parsimonious model to derive first-best outcomes. We conclude that electrical storage is unlikely to limit the transition to renewable energy.