An analysis of storage revenues from the time-shifting of electrical energy in Germany and Great Britain from 2010 to 2016

Abstract The purpose of this paper is to investigate the level of revenues available to storage operators through the bulk time-shifting of electrical energy in Germany and Great Britain over the 7 years from 2010 to 2016, and to analyse the impact of volatility and underlying mean price on the potential revenues that a storage operator could theoretically capture. The analysis is carried out using an algorithm adapted from previous work, coupled with new empirical hourly price data from the German and Great British day-ahead electrical markets, and using characteristics typical of a pumped-storage hydropower scheme (1000 MWh, 125 MW charge and discharge, and 75% round-trip efficiency). Our results suggest that volatility rather than average price is the dominant factor affecting storage revenues, with a 1% increase in volatility implying an increase in mean daily storage revenues of €300 in Germany and £550 in Great Britain for the simulated storage plant. In comparison, an increase in underlying mean prices of €1 per MWh leads to an increase in mean daily revenue of €100 in Germany, with a £1 per MWh increase in underlying mean prices leading to an increase in mean daily revenue of £380 in Great Britain. We also find that during the period 2010–2016, the times when the highest revenue is derived have moved from late morning to early evening, which we attribute to the increase in low short-run marginal cost solar PV electricity in both markets suppressing the day-ahead wholesale electrical prices. In addition, we find a large increase in storage operator revenues in Britain in the last quarter of 2016, due to a number of events that impacted the price of electricity, however these would have been difficult to predict with any degree of certainty. This paper therefore highlights the perennial problem of forecasting the time-shifting revenue for electrical energy, with its high degree of variation from one year to the next that would undoubtedly impact the financing of these capital-intensive projects that seek to capture these variable revenues.