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Energy Arbitrage Analysis for Market-Selection of a Battery Energy Storage System-Based Venture

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  • Inam Ullah Khan

    (Department of Electrical & Computer Engineering, Faculty of Engineering and Applied Science, Memorial University of Newfoundland, 240 Prince Phillip Drive, St. John’s, NL A1B 3X5, Canada)

  • Mohsin Jamil

    (Department of Electrical & Computer Engineering, Faculty of Engineering and Applied Science, Memorial University of Newfoundland, 240 Prince Phillip Drive, St. John’s, NL A1B 3X5, Canada)

Abstract

The increasing integration of intermittent renewable energy sources necessitates effective energy storage solutions, with battery energy storage systems (BESSs) emerging as promising candidates for energy arbitrage operations. This study conducted a comprehensive comparative analysis of 29 European electricity markets to identify optimal locations for utility-scale BESS-enabled energy arbitrage ventures. Using hourly wholesale electricity price data spanning January 2015 to December 2023, we employed statistical analysis techniques, 3D surface plots, and developed a novel energy arbitrage feasibility (EAF) score-based ranking system that integrates electricity market volatility metrics with regulatory and economic variables including gross domestic product per capita, index of economic freedom, and electricity supply-origin risk (ESOR). Five investor preference scenarios were analyzed: risk-averse, ESOR-sensitive, economy-sensitive, volatility-sensitive, and equally weighted approaches. Results demonstrated that Estonia ranked highest in three scenarios, achieving the maximum absolute EAF score of 0.558197 in the volatility-sensitive scenario, while Luxembourg led in the ESOR and economy-sensitive scenarios. Estonia’s market characteristics support single daily charge–discharge cycles, whereas Luxembourg enables dual cycles, offering different operational strategies. The EAF scoring methodology provides a standardized framework for cross-country investment decision-making in energy arbitrage ventures. These findings indicate that market selection significantly impacts the BESS arbitrage profitability, with Estonia and Luxembourg representing the most favorable investment destinations.

Suggested Citation

  • Inam Ullah Khan & Mohsin Jamil, 2025. "Energy Arbitrage Analysis for Market-Selection of a Battery Energy Storage System-Based Venture," Energies, MDPI, vol. 18(16), pages 1-43, August.
    • Handle: RePEc:gam:jeners:v:18:y:2025:i:16:p:4245-:d:1721251
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    References listed on IDEAS

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