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Working paper / Energy

Catching the Maximum Market Value of Electricity Storage – Technical, Economic and Regulatory Aspect

Author(s): HE Xian, ZACHMANN Georg

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ABSTRACT

The creation of competitive wholesale electricity markets allows to evaluate the “arbitrage value” of an electricity storage unit, which stems from buying and storing electricity when prices are low, and selling it when prices are high. The focus of this paper is to demonstrate that the arbitrage value can be highly sensitive with respect to the dimensioning of an electricity storage unit. A simulation model is explored to calculate the arbitrage value of different storage units by finding the optimal hourly operating strategy during one-year period. The results of simulation show that optimizing the dimensioning of a storage unit is as important as choosing the fittest technology. Furthermore we provide evidence that the optimal set-up of a storage unit can adapt to exogenous factors such as grid tariff and local electricity price characteristics. These findings suggest that the maximisation of market value of electricity storage should be based on the optimisation of the dimensioning of the storage unit in specific economic and regulatory environment.