An assessment of European electricity arbitrage using storage systems

Electricity arbitrage involves the storage of energy at times when prices are low, and offering it on the markets when prices are high. The development of renewable and energy storage technologies may provide a promising business opportunity for electricity arbitrage. In this regard, this study analyses the current viability of the electricity arbitrage business (via Li-Ion batteries) using a sample of European countries in the year 2019; countries where electricity prices (day-ahead market) and financial conditions show a certain degree of heterogeneity. We basically follow a sequence of three analyses in our study. Firstly, a Linear Mixed-Integrated Programming model has been developed to optimize the arbitrage strategy for each country in the sample. Secondly, using the cash-flows from the optimization model, we calculate two financial indicators (Net Present Value (NPV) and Internal Rate of Return) in order to select the optimal inverter size for each country. Tax and discount rates specific to each country have been used with the calculation of this second rate following the methodology proposed by most of the national agencies. Thirdly, a mixed linear regression model is proposed in order to investigate the importance of observed and unobserved heterogeneity (at country level) in explaining the business profitability. The findings show that, in the near future, the most attractive European countries for the electricity arbitrage business should be the United Kingdom and Ireland, with current NPV close to-400,000 V, while Spain and Portugal might show the worst performances, their current NPV are close to-800,000 V. (c) 2021 Elsevier Ltd. All rights reserved.