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

Dimitrios Zafeirakis, Konstantinos Chalvatzis, Giovanni Baiocchi, Georgios Daskalakis

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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, characterised 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.
Original languageEnglish
Pages (from-to)971–986
Number of pages16
JournalApplied Energy
Early online date27 May 2016
Publication statusPublished - 15 Dec 2016


  • Pumped hydro storage
  • compressed air energy storage
  • energy trade
  • production cost
  • wholesale market
  • spot price

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