Can Battery Storage Arbitrage Pay Off? Evidence from the Portuguese Day-Ahead Electricity Market

This study evaluates the economic feasibility of standalone Battery Energy Storage Systems (BESS) for energy arbitrage in the Portuguese day-ahead electricity market. A Mixed-Integer Linear Programming (MILP) model is developed to optimize the operation of BESS configurations with varying durations (2, 4, 6, and 8 h), using historical price data from 2020 to 2024. The model incorporates realistic operational constraints, and the resulting arbitrage revenues are analyzed under multiple cost scenarios. Additionally, the study performs a Net Present Value (NPV) analysis using average and year-specific price profiles and three different scenarios to assess long-term investment viability. Consistent with current market access conditions in Portugal, the analysis focuses exclusively on day-ahead market arbitrage, and alternative revenue streams (intraday, real-time, ancillary services) are discussed qualitatively due to limited liquidity and restricted participation rules. The results reveal that although BESS can generate positive cash flows in recent high-volatility years, all configurations yield negative NPVs under current cost structures and market conditions. Even with optimistic cost reductions, breakeven is not achieved, indicating that standalone arbitrage remains financially not viable. These findings highlight the importance of cost optimization and the need for complementary revenue streams or policy support to make such investments feasible in Portugal.