Energy storage arbitrage, which involves charging batteries when power prices are low and discharging them during peak demand periods, is a promising avenue for battery storage operators to generate revenue and profits, and Bulgaria’s market has the highest potential of all European countries. Rystad Energy, which compiled a report on arbitrage opportunities, also warned that profitability issues could hinder the development of battery storage, which is critical for the green energy transition.
Bulgaria, Italy, and Hungary offer the highest profit potential for energy arbitrage in Europe in terms of average spot market revenue in 2023, according to the latest report by Rystad, an energy research and business intelligence company. At the bottom of the list are Sweden, Norway, and Finland, which have the lowest profit potential due to their relatively low peak prices.
“Bulgaria’s power market offers the most opportunity for high revenues, with a battery storage system with two hours of discharge capacity using energy arbitrage capable of generating EUR 110 per megawatt-hour,” according to Rystad.
In the report, Rystad ranked countries by the opportunities for arbitrage profits from battery energy storage system (BESS) in relation to the system costs. On its list, a total of ten European markets have the potential for profit in the field, while in 13 countries energy arbitrage would be unprofitable.
Croatia ranks among markets that offer profitability, with Slovenia just below the line
Of the countries tracked by Balkan Green Energy News, Croatia is ranked among the profitable markets, in the eighth spot, while Slovenia is just below the line, in the 11th.
“BESS capacity could be the key to a reliable, green energy future, but questions over its profitability could severely slow uptake. Currently, profitability is limited to markets operating under very specific conditions, so policies and incentives are required to mitigate risk and encourage build-out,” said Sepehr Soltani, energy storage analyst at Rystad.
Uncertain profits could slow down battery storage roll-out
The report also analyzed the scenario that involves a 30% tax credit for battery storage operators. In such an environment, energy storage arbitrage would be profitable in most of the analyzed markets, while only three would stay in the red – Switzerland, Norway, and Sweden.
Soltani, however, says that while spot market profits exceed system costs in a few European countries, even a 30% tax credit on BESS projects may not be enough to make energy arbitrage a standalone viable business case in 2023.
PPAs hold promise for battery storage profitability
The report also noted that battery storage operators could benefit from power purchase agreements (PPAs). “Just as PPAs increase the appeal of solar and wind farms, attracting investors and propelling industry maturity in recent years, this mechanism holds promise as a potential solution for BESS as well,” Rystad said.