Price Difference Drives Energy Storage Arbitrage Profits

Widening peak-to-valley spreads bring arbitrage opportunities

 

Peak-valley price difference is one of the key factors affecting the economic benefits of battery energy storage systems. According to BloombergNEF, the minimum-maximum price difference of two-hour batteries showed an overall upward trend in most European regions between 2019 and 2024. The increase in the price difference in 2022 was mainly due to the increase in electricity prices caused by the conflict between Russia and Ukraine. As the conflict eased, the price difference fell in 2023. Since mid-2024, the trend of new energy access impacting the power grid has become more obvious, and the price difference has continued to increase. The proportion of new energy installed capacity is a long-term upward variable. In the future, the price difference is expected to increase further, and the profit potential of the energy storage market in peak-valley price difference arbitrage will be further expanded.

 

Taking Germany as an example, as of 2024, the internal rate of return (IRR) of some independent energy storage projects in Germany has reached 8.69%, achieving good profitability. The minimum-maximum price difference for electricity prices required to achieve profitability for one-hour storage batteries is on average 137€/MWh, while the required price difference for two-hour and four-hour storage batteries is 114€/MWh and 103€/MWh respectively. As of the end of 2022, the average capacity auction price for 2h storage systems in Europe reached 26,000€/MW/year, which is quite profitable.