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"Arbitrage Case studies."
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Arbitraging Japan
For many financial market professionals worldwide, the era of high finance is over. The times in which bankers and financiers were the primary movers and shakers of both economy and society have come to an abrupt halt. What has this shift meant for the future of capitalism? What has it meant for the future of the financial industry? What about the lives and careers of financial operators who were once driven by utopian visions of economic, social, and personal transformation? And what does it mean for critics of capitalism who have long predicted the end of financial institutions? Hirokazu Miyazaki answers these questions through a close examination of the careers and intellectual trajectories of a group of pioneering derivatives traders in Japan during the 1990s and 2000s.
eBook
Arbitraging Japan
For many financial market professionals worldwide, the era of high finance is over. The times in which bankers and financiers were the primary movers and shakers of both economy and society have come to an abrupt halt. What has this shift meant for the future of capitalism? What has it meant for the future of the financial industry? What about the lives and careers of financial operators who were once driven by utopian visions of economic, social, and personal transformation? And what does it mean for critics of capitalism who have long predicted the end of financial institutions? Hirokazu Miy
Book
Community Battery for Collective Self-Consumption and Energy Arbitrage: Independence Growth vs. Investment Cost-Effectiveness
Integrating a grid-connected battery into a renewable energy community amplifies the collective self-consumption of photovoltaic energy and facilitates energy arbitrage in the electricity markets. However, how much can energy independence really increase? Is it a cost-effective investment? The answer to these questions represents a novelty in the literature due to the innovative nature of the asset under consideration and the market and regulatory framework in which it is evaluated. Employing a net present value assessment, our analysis incorporated aging effects and conducts sensitivity analyses across various parameters: the number of community customers, electricity market prices, battery cost and size, and the decision to engage in energy arbitrage. Each scenario underwent a 20-year hourly simulation using an aging-aware rolling-horizon 24 h-looking-ahead scheduling, optimized with mixed-integer linear programming. Simulations conducted on the Italian market indicate that dedicating a battery solely to collective self-consumption is the most efficient solution for promoting a community’s energy independence, but it lacks economic appeal. However, integrating energy arbitrage, despite slight compromises in self-sufficiency and battery longevity, halves the payback period and enhances the attractiveness of larger battery investments. The net present value is contingent upon the battery size, customer number, and market prices. Nevertheless, if the battery cost does not exceed 200 EUR/kWh, the investment becomes cost-effective across all scenarios.
Journal Article
Defining and Evaluating Use Cases for Battery Energy Storage Investments: Case Study in Croatia
Battery energy storage systems (BESS) and renewable energy sources are complementary technologies from the power system viewpoint, where renewable energy sources behave as flexibility sinks and create business opportunities for BESS as flexibility sources. Various stakeholders can use BESS to balance, stabilize and flatten demand/generation patterns. These applications depend on the stakeholder role, flexibility service needed from the battery, market opportunities and obstacles, as well as regulatory aspects encouraging or hindering integration of storage technologies. While developed countries are quickly removing barriers and increasing the integration share of BESS, this is seldom the case in developing countries. The paper identifies multiple case opportunities for different power system stakeholders in Croatia, models potential BESS applications using real-world case studies, analyzes feasibility of these investments, and discusses financial returns and barriers to overcome.
Journal Article
Strategic Bidding to Increase the Market Value of Variable Renewable Generators in New Electricity Market Designs
Electricity markets with a high share of variable renewable energy require significant balancing reserves to ensure stability by preserving the balance of supply and demand. However, they were originally conceived for dispatchable technologies, which operate with predictable and controllable generation. As a result, adapting market mechanisms to accommodate the characteristics of variable renewables is essential for enhancing grid reliability and efficiency. This work studies the strategic behavior of a wind power producer (WPP) in the Iberian electricity market (MIBEL) and the Portuguese balancing markets (BMs), where wind farms are economically responsible for deviations and do not have support schemes. In addition to exploring current market dynamics, the study proposes new market designs for the balancing markets, with separate procurement of upward and downward secondary balancing capacity, aligning with European Electricity Regulation guidelines. The difference between market designs considers that the wind farm can hourly bid in both (New 1) or only one (New 2) balancing direction. The study considers seven strategies (S1–S7) for the participation of a wind farm in the past (S1), actual (S2 and S3), New 1 (S4) and New 2 (S5–S7) market designs. The results demonstrate that new market designs can increase the wind market value by 2% compared to the optimal scenario and by 31% compared to the operational scenario. Among the tested approaches, New 2 delivers the best operational and economic outcomes. In S7, the wind farm achieves the lowest imbalance and curtailment while maintaining the same remuneration of S4. Additionally, the difference between the optimal and operational remuneration of the WPP under the New 2 design is only 22%, indicating that this design enables the WPP to achieve remuneration levels close to the optimal case.
Journal Article
MNE institutional advantage: How subunits shape, transpose and evade host country institutions
Scholars increasingly emphasize the impact of institutions on multinational enterprises (MNEs), but the opposite relationship has attracted less research -that is, MNE agency in relation to institutions. Based on a comparative case study of six MNEs from the United States and Sweden, this paper remedies this. It explores and explicates MNE subunits' strategic responses to host country institutional constraints and opportunities in five different regions. A new-institutional approach is adopted, which allows for an investigation of MNE subunit agency in relation to normative and cognitive institutions, as well as regulative ones. This fine-grained analysis reveals not only what kinds of responses MNE subunits invoke, but why and how they are able to respond. We identify four strategic responses by which subunits shape, transpose and evade institutions in the pursuit of competitive advantage: Innovation, Arbitrage, Circumvention and Adaptation These responses are driven by three key enablers: multi nationality, foreignness and institutional ambiguity -that serve to enhance and heighten three mechanisms: reflexivity, role expectations and resources. By linking the enablers and the to specific types of strategic responses in a framework and typology, the paper not only contributes to emerging research on the interplay between MNEs, institutions and strategy, but to strategy practice.
Journal Article
An Open-Source Energy Arbitrage Model Involving Price Bands for Risk Hedging with Imperfect Price Signals
The increased uptake of variable renewable energy sources has increased electricity price volatility in many energy pool markets, providing an opportunity for storage systems to profit through energy arbitrage. Comparison between the cost or value of storage systems engaging in energy arbitrage should be performed on a levelised basis due to differences in system lifetime. Existing energy arbitrage models with bid/offer curves and imperfect forecasting are typically computationally expensive and are impractical for calculating lifetime levelised cost metrics. In this work, an open-source modular energy arbitrage model with bid and offer curve inputs was developed for a lithium-ion battery energy storage system (BESS) and pumped hydro system (PHS) to analyse lifetime levelised cost and revenue. The mixed integer linear program scheduling module included a new piece-wise linearised description of PHS charging behaviour for rapid optimisation. A one-at-a-time sensitivity analysis indicated that levelised cost and revenue were highly sensitive to discharging efficiency. In a case study based on Australia’s National Electricity Market, imperfect forecasting with no risk hedging was found to increase levelised costs by up to 24% and decrease levelised revenue by up to 50% relative to perfect price forecasting, despite 95% of prices being forecast to be within $35/MWh of the actual trading price. BESS levelised costs were more significantly correlated with consistent low risk bids (Kendall Tau-b of 0.75), since the undiscounted capital costs contribute to a larger proportion of the overall costs than in the PHS systems.
Journal Article
Investment Decision for Long-Term Battery Energy Storage System Using Least Squares Monte Carlo
The use of renewable energy sources to achieve carbon neutrality is increasing. However, the uncertainty and volatility of renewable resources are causing problems in power systems. Flexible and low-carbon resources such as Energy Storage Systems (ESSs) are essential for solving the problems of power systems and achieving greenhouse gas reduction goals. However, ESSs are not being installed because of Korea’s fuel-based electricity market. To address this issue, this paper presents a method for determining the optimal investment timing of Battery Energy Storage Systems (BESSs) using the Least Squares Monte Carlo (LSMC) method. A case study is conducted considering the System Marginal Price (SMP) and Capacity Payment (CP), which are electricity rates in Korea. Revenue is calculated through the arbitrage of a 10 MW/40 MWh lithium-ion BESS, and linear programming optimization is performed for ESS scheduling to maximize revenue. The ESS revenue with uncertainty is modeled as a stochastic process using Geometric Brownian Motion (GBM), and the optimal time to invest in an ESS is determined using an LSMC simulation considering investment costs. The proposed method can be used as a decision-making tool for ESS investors to provide information on facility investments in arbitrage situations.
Journal Article