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

Inam Ullah Khan and Mohsin Jamil ()
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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

Energies, 2025, vol. 18, issue 16, 1-43

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.

Keywords: electricity price analysis; energy markets; battery energy storage system (BESS); energy arbitrage; volatility; investments (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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