Revenues from storage in a competitive electricity market: Empirical evidence from Great Britain

Despite the high upfront financial costs associated with the existing technologiesfor energy storage they have become more appealing in recent years in response to theincreasing importance of non-dispatchable sources of generation in the energy systems ofdeveloped countries. One of the essential pieces of information required to value the monetarybenefits which can be achieved when investing in energy storage is the price that energy willcommand when it is released, compared with the price paid when injected into the storage. Inthis paper we investigate this relationship using time series statistical techniques for variousmaturities of forward prices, using data on assessments of power prices for future delivery. Wewill examine the relationship for predictability and size of gap in order to answer questionsabout the likely financial benefits which can be obtained from optimal time management ofstorage facilities, using a technology neutral approach. Our initial results indicate that sucharbitrage opportunities exist for storage facilities, especially when energy is stored over a shorttermperiod of a day or a week.