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Revenues from storage in a competitive electricity market: Empirical evidence from Great Britain

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Author Info

  • Monica Giulietti

    ()
    (University of Warwick)

  • Luigi Grossi

    ()
    (University of Verona)

Abstract

Despite the high upfront financial costs associated with the existing technologies for energy storage they have become more appealing in recent years in response to the increasing importance of non-dispatchable sources of generation in the energy systems of developed countries. One of the essential pieces of information required to value the monetary benefits which can be achieved when investing in energy storage is the price that energy will command when it is released, compared with the price paid when injected into the storage. In this paper we investigate this relationship using time series statistical techniques for various maturities of forward prices, using data on assessments of power prices for future delivery. We will examine the relationship for predictability and size of gap in order to answer questions about the likely financial benefits which can be obtained from optimal time management of storage facilities, using a technology neutral approach. Our initial results indicate that such arbitrage opportunities exist for storage facilities, especially when energy is stored over a short-term period of a day or a week.

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Bibliographic Info

Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2013/37.

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Length: 23 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:ieb:wpaper:2013/6/doc2013-37

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Related research

Keywords: Energy storage; wholesale electricity markets; electricity price returns; volatility; arbitrage;

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  1. Greenblatt, Jeffery B. & Succar, Samir & Denkenberger, David C. & Williams, Robert H. & Socolow, Robert H., 2007. "Baseload wind energy: modeling the competition between gas turbines and compressed air energy storage for supplemental generation," Energy Policy, Elsevier, Elsevier, vol. 35(3), pages 1474-1492, March.
  2. Sioshansi, Ramteen & Denholm, Paul & Jenkin, Thomas & Weiss, Jurgen, 2009. "Estimating the value of electricity storage in PJM: Arbitrage and some welfare effects," Energy Economics, Elsevier, Elsevier, vol. 31(2), pages 269-277, March.
  3. Byers, Joe Wayne, 2006. "Commodity storage valuation: A linear optimization based on traded instruments," Energy Economics, Elsevier, Elsevier, vol. 28(3), pages 275-287, May.
  4. Grünewald, Philipp & Cockerill, Tim & Contestabile, Marcello & Pearson, Peter, 2011. "The role of large scale storage in a GB low carbon energy future: Issues and policy challenges," Energy Policy, Elsevier, Elsevier, vol. 39(9), pages 4807-4815, September.
  5. Xian HE & Georg ZACHMANN, 2010. "Catching the maximum market value of electricity storage – technical, economic and regulatory aspect," RSCAS Working Papers, European University Institute 2010/02, European University Institute.
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