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The value of arbitrage for energy storage: Evidence from European electricity markets

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  • Zafirakis, Dimitrios
  • Chalvatzis, Konstantinos J.
  • Baiocchi, Giovanni
  • Daskalakis, Georgios

Abstract

We use a portfolio of energy trade strategies to determine the value of arbitrage for pumped hydro and compressed air energy storage across European markets. Our results demonstrate that arbitrage opportunities exist in less integrated markets, characterized by significant reliance on energy imports and lower level of market competitiveness. We show that, among all strategies tested, arbitrage value maximizes for the weekly back to back energy trade strategy. Moreover we estimate the optimum size of energy storage systems in terms of arbitrage value for each different electricity market and evaluate the potential of arbitrage to support investment in the sector. Finally, it is argued that energy storage can take over multiple roles as a necessary positioning to facilitate financial profitability.

Suggested Citation

  • Zafirakis, Dimitrios & Chalvatzis, Konstantinos J. & Baiocchi, Giovanni & Daskalakis, Georgios, 2016. "The value of arbitrage for energy storage: Evidence from European electricity markets," Applied Energy, Elsevier, vol. 184(C), pages 971-986.
    • Handle: RePEc:eee:appene:v:184:y:2016:i:c:p:971-986
    DOI: 10.1016/j.apenergy.2016.05.047
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