Maximizing Battery Storage Profits via High-Frequency Intraday Trading

Quantitative Finance > Trading and Market Microstructure

arXiv:2504.06932 (q-fin)

[Submitted on 9 Apr 2025 (v1), last revised 17 Apr 2025 (this version, v2)]

Maximizing Battery Storage Profits via High-Frequency Intraday Trading

David Schaurecker, David Wozabal, Nils Löhndorf, Thorsten Staake

Maximizing revenue for grid-scale battery energy storage systems in continuous intraday electricity markets requires strategies that are able to seize trading opportunities as soon as new information arrives. This paper introduces and evaluates an automated high-frequency trading strategy for battery energy storage systems trading on the intraday market for power while explicitly considering the dynamics of the limit order book, market rules, and technical parameters. The standard rolling intrinsic strategy is adapted for continuous intraday electricity markets and solved using a dynamic programming approximation that is two to three orders of magnitude faster than an exact mixed-integer linear programming solution. A detailed backtest over a full year of German order book data demonstrates that the proposed dynamic programming formulation does not reduce trading profits and enables the policy to react to every relevant order book update, enabling realistic rapid backtesting. Our results show the significant revenue potential of high-frequency trading: our policy earns 58% more than when re-optimizing only once every hour and 14% more than when re-optimizing once per minute, highlighting that profits critically depend on trading speed. Furthermore, we leverage the speed of our algorithm to train a parametric extension of the rolling intrinsic, increasing yearly revenue by 8.4% out of sample.

Subjects:Trading and Market Microstructure (q-fin.TR); Systems and Control (eess.SY); Optimization and Control (math.OC)Cite as:arXiv:2504.06932 [q-fin.TR] (or arXiv:2504.06932v2 [q-fin.TR] for this version) https://doi.org/10.48550/arXiv.2504.06932Focus to learn more