Impact of the splitting of the German–Austrian electricity bidding zone on investment in a grid-scale battery energy storage system deployed for price arbitrage with gray and green power in Austrian and German day-ahead power markets

Abstract

The splitting of the German–Austrian electricity bidding zone in October 2018 established limits for cross-border exchanges of power between Germany and Austria, which led to the decoupling of German and Austrian wholesale power prices. We analyze the impact of the split on the investment in lithium-ion grid-scale battery energy storage systems (BESS) used for intertemporal arbitrage in German and Austrian day-ahead power markets with hourly contracts operated by the Energy Exchange of Austria. The paper was written in response to the increasing share of green power in the national energy mix of the two countries, followed by a similar development in the volume of green power traded. Arbitrage with green power was analyzed and compared to arbitrage with power from conventional sources using a robust mixed-integer linear programming (MILP) model extended with a battery degradation process. The model was solved for different levels of depth of discharge (DOD) to identify the optimum between cycle life and calendar aging with respect to prevailing market conditions. Using predicted costs of battery, a break-even point was reached with 60% DOD identified as the optimal pattern for the dispatch of the BESS. A separate scenario was considered for the analysis of the impact of moving from the perfect knowledge of future prices to a situation where day-ahead prices are forecasted using the seasonal autoregressive integrated moving average (SARIMA) model.