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The value of electricity storage arbitrage on day-ahead markets across Europe

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  • Mercier, Thomas
  • Olivier, Mathieu
  • De Jaeger, Emmanuel

Abstract

This paper investigates the historical value of electricity storage from the perspective of the storage owner in day-ahead markets (DAM) across Europe. A technology-neutral formulation is used, where the storage is modelled based on its round-trip efficiency and storage duration. A mixed-integer linear program (MILP) is built to compute the perfect-foresight value of a price-taker storage from arbitrage, using historical hourly DAM prices in all the bidding zones of the EU-28 countries, Norway, Switzerland, and Turkey. Depending on the bidding zones, the DAM price data starts between 2000 and 2017, and spans to 2021. The model is solved for varying round-trip efficiencies (50% to 100%) and storage durations (1 to 10 h) for every bidding zone and every year in the dataset. The results reveal significant variations in storage value from arbitrage, both geographically and temporally, with round-trip efficiency having a major impact on arbitrage value and storage duration having very low marginal value beyond 4 to 6 h. Additionally, the paper investigates the impact of variable grid fees on arbitrage value, using the case of Belgium, where fees depend on storage system size. The initial MILP is therefore augmented to account for the complex dependencies between storage size and the resulting grid fees. The augmented MILP shows that grid fees can decrease storage arbitrage value by 20% to 50%, and that they can also dramatically decrease storage participation in DAMs.

Suggested Citation

  • Mercier, Thomas & Olivier, Mathieu & De Jaeger, Emmanuel, 2023. "The value of electricity storage arbitrage on day-ahead markets across Europe," Energy Economics, Elsevier, vol. 123(C).
    • Handle: RePEc:eee:eneeco:v:123:y:2023:i:c:s0140988323002190
    DOI: 10.1016/j.eneco.2023.106721
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    More about this item

    Keywords

    Energy storage; Arbitrage; Day-ahead market; Mixed-integer linear programming; Grid fees;
    All these keywords.

    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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