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

Thomas Mercier, Mathieu Olivier and Emmanuel De Jaeger

Energy Economics, 2023, vol. 123, issue C

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.

Keywords: Energy storage; Arbitrage; Day-ahead market; Mixed-integer linear programming; Grid fees (search for similar items in EconPapers)
JEL-codes: L94 M21 N74 O52 Q02 Q42 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:123:y:2023:i:c:s0140988323002190

DOI: 10.1016/j.eneco.2023.106721

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