Economic assessment of hybrid energy storage for multi-energy arbitrage in wholesale electricity markets using an optimization-based approach

Electric power grids with large shares of intermittent renewable energy generation tend to face frequent imbalances between energy supply and demand, and require energy storage solutions for flexibility. Large-scale integration of energy storage remains a challenge owing to the limited commercially-attractive deployment options. Most of the studies focus on the cost effectiveness of energy storage systems for various services to the grid. This work thus focuses on commercial application of energy storage and explores the economic potential of hybrid energy storage systems for multi-energy trading and arbitrage in electricity markets. It estimates the financial returns from energy trading through a linear optimization model, which maximizes profits at given energy prices by finding a suitable hybrid energy system configuration and the trading pattern. Based on the analytical framework, a case study is conducted that considers a combination of Li-ion battery and Solid Oxide Reversible Fuel Cell technologies and evaluates the trading economics for electricity-only, and electricity and hydrogen arbitrage in four wholesale electricity hubs in the United States. The results based on historical prices of 2020–2023 reveal that electricity-only arbitrage is not profitable in most of the cases due to high capital costs of storage. Conversely, multi-energy arbitrage is found to be promising as electricity and hydrogen arbitrage enabled by reversible fuel cells generated annual profit margins of at least 20 % in all four markets. The energy storage system configuration and trading margins are greatly impacted by the energy prices. The approach and findings are critical to expand the horizon of economically viable avenues for grid-scale energy storage adoption.