Potential utilization of battery energy storage systems (BESS) in the major European electricity markets

•A general payoff model is proposed to address the operational flexibility of battery systems.•Potential utilization of battery systems is evaluated using utilization factors.•Battery systems are not feasible for energy arbitrage in the current European electricity markets.•Potential utilization of battery systems is promising in Europe for frequency regulation services. Given the declining cost of battery technology in the last decade, nowadays the application of Battery Energy Storage Systems (BESS) becomes a more attractive solution in electrical power systems. The objective of this work is to analyze the potential utilization of BESS in the major European electricity markets. A general payoff model for BESS operation is proposed to correctly address the operational flexibility of battery systems. Utilization factors such as potentially profitable utilization time and rate are calculated for common applications including energy arbitrage and frequency support services using real market information. The result shows that under the current empirical estimation of the battery cost and lifetime, BESS is not feasible for energy arbitrage in most of the European electricity markets. However, BESS shows clearly and significantly higher potential in providing frequency support services. The result suggests that, when the frequency containment reserve is remunerable, BESS has already become potentially profitable in central European countries. For example in 2021, the potentially profitable utilization rate has reached almost 100% for the “Frequency Containment Reserve for Normal operation” (FCR-N) in the Danish market. Meanwhile, in the British Isles and some other islanded local markets, a remarkable level of scarcity of flexibility has been observed. As a result, the potential of BESS would also be encouraging in these markets with a declining battery cost in the future, if the market design would be improved to correctly address the flexibility provided by the battery systems.