Globally, the electricity sector is moving from large centralized grids powered by fossil fuels to smaller, smarter, renewable local grids.

A major area of ​​interest is “energy arbitrage”, which allows users to buy and store electricity when it is cheaper and sell or use it when the cost is high.

But Aotearoa New Zealand is slow to get started, even though it is a crucial part of transitioning to a zero-carbon future. Why is it?

Small grid technologies and infrastructure are still in the experimental phase, being tested for effectiveness and desirability of different configurations, ownership models and business arrangements. And smart energy management systems that can provide prescient prediction of market dynamics are not widely used.

To better understand these dynamics, we modeled a theoretical “microgrid” in a residential development, Totarabank, in the North Island of Aotearoa.

This satellite image shows the case study area.
Google Earth™ mapping service, Author provided

We have used the model to predict expected business returns from investing in microgrids and to unlock potential revenue streams from energy arbitrage.

Intelligent battery programming

Energy arbitrage requires battery storage and smart control to get the most out of the production of a local renewable energy system.

This can be achieved by forecasting future electricity consumption in the short term and linking this to the spot market price of electricity. Sophisticated real-time controllers then decide whether the local system should store or sell to the market (or store and sell later).

Battery storage systems can vary in size, from community-scale batteries powering a neighborhood to batteries within an electric vehicle (EV) fleet. The fundamental control processes needed to achieve an optimal result are basically the same, except that community batteries are stationary while EV batteries move.



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Community batteries can store electricity purchased from the grid during off-peak periods and then discharge it during peak periods. Neighborhoods with solar power can recharge community batteries in the middle of the day when solar-generated electricity is plentiful and discharge during the more expensive evening peak.

EV batteries can be used in the same way, using cheaper overnight rates or periods of excess wind overnight to recharge. Energy stored in EV batteries can then be offloaded to local loads or sold back into the grid when the price is highest, creating an additional revenue stream.

Modeling return on investment

In our modeling, we assumed that the main reasons people will invest in clean energy technologies are sustainability, energy independence and resilience. We believe that energy arbitrage could be an enabler of capital-intensive microgrids, as opposed to investment made on a purely commercial basis.

Specifically, we considered a grid-connected microgrid integrating solar photovoltaic (PV) and wind turbines. The system is also backed by a community battery and has a fleet of ten personal electric vehicles to service.

A schematic showing the modeled microgrid.
The modeled microgrid includes wind and solar power, a community battery and a fleet of electric vehicles.
Author provided

We considered two scenarios: one with network arbitrage revenue and one without.

Our results suggest that revenue explicitly from energy arbitrage could reduce total system cost by at least 12%. To put that into perspective, for a typical NZ$10 million investment in a city-wide microgrid, that means $1.2 million in savings.

Another interesting finding was that the time the batteries were able to sustain critical loads during unplanned grid outages was about 16 hours higher per year, compared to the case without intelligent control. This is a remarkable resilience advantage.



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What does this kind of analysis mean to you? If you are part of a community interested in owning and operating a microgrid, you now have enough evidence to ask your developer to consider energy arbitrage so the community can participate in the microgrid market. electricity to make a profit.

If you own an electric vehicle and are trying to get cheaper overnight rates, here’s a look at future offers from power retailers to get your wheeled storage working with vehicle-to-grid technology.

Overall, energy arbitrage is a great tool to support renewable energy investment decisions and help firm up revenue forecasts.