Rolling intrinsic for battery valuation in day-ahead and intraday markets

ArXiv ID: 2510.01956 “View on arXiv”

Authors: Daniel Oeltz, Tobias Pfingsten

Abstract

Battery Energy Storage Systems (BESS) are a cornerstone of the energy transition, as their ability to shift electricity across time enables both grid stability and the integration of renewable generation. This paper investigates the profitability of different market bidding strategies for BESS in the Central European wholesale power market, focusing on the day-ahead auction and intraday trading at EPEX Spot. We employ the rolling intrinsic approach as a realistic trading strategy for continuous intraday markets, explicitly incorporating bid–ask spreads to account for liquidity constraints. Our analysis shows that multi-market bidding strategies consistently outperform single-market participation. Furthermore, we demonstrate that maximum cycle limits significantly affect profitability, indicating that more flexible strategies which relax daily cycling constraints while respecting annual limits can unlock additional value.

Keywords: Battery Energy Storage Systems, Day-Ahead Auction, Intraday Trading, Rolling Intrinsic, Multi-Market Bidding, Commodities (Electricity)

Complexity vs Empirical Score

  • Math Complexity: 6.5/10
  • Empirical Rigor: 8.5/10
  • Quadrant: Holy Grail
  • Why: The paper employs advanced optimization and stochastic modeling techniques to evaluate battery trading strategies, while demonstrating high empirical rigor with detailed analysis of liquidity constraints, bid-ask spreads, and robust backtesting on real Central European power market data.
  flowchart TD
    A["Research Goal<br/>Optimize BESS bidding in Day-Ahead & Intraday markets"] --> B["Data & Inputs"]
    B --> C["Methodology<br/>Rolling Intrinsic Strategy with Bid-Ask Spreads"]
    C --> D{"Computations<br/>Single vs. Multi-Market Bidding"}
    D --> E["Key Findings & Outcomes"]
    
    subgraph B ["Inputs"]
        B1["EPEX Spot Data"]
        B2["Market Prices"]
        B3["Liquidity Constraints"]
    end

    subgraph E ["Outcomes"]
        E1["Multi-market strategies outperform single-market"]
        E2["Flexibility is crucial: relaxing daily limits unlocks value"]
        E3["Profitability tied to market access & cycling constraints"]
    end