In the energy market, arbitrage describes the practice of buying electricity in one market at a lower price and simultaneously selling it in another market at a higher price. This trading strategy utilises price differences between different marketplaces or time periods and enables players to make a profit without taking any price risk of their own. Arbitrage contributes significantly to market efficiency by eliminating price anomalies and harmonising prices between markets.

Arbitrage transactions play an important role in the European electricity market, which is characterised by various regional trading centres. Due to differences in demand, the weather (e.g. wind and sun) or regional grid capacities, different electricity prices can exist in different countries at the same time. Arbitrage traders exploit these differences by buying electricity cheaply in one country and selling it in another, more expensive market. This is usually done via special trading platforms that enable cross-border electricity trading.

A special form of arbitrage is time arbitrage, in which electricity is bought at times of low demand and therefore favourable prices and sold at peak load times when prices rise. This strategy is particularly attractive for operators of battery storage systems or other flexibility options, as they have the opportunity to store energy and sell it later at a higher price.

For the energy market as a whole, arbitrage is a mechanism that contributes to price stability. By utilising price differences, arbitrage traders balance supply and demand across different markets, which leads to a reduction in extreme price differences. This is particularly important in liberalised energy markets, where trading between different players can take place freely and market signals are processed efficiently.

Arbitrage remains an important instrument for market players to profit from price fluctuations and at the same time contribute to the stability and integration of the energy markets. With the further expansion of renewable energies and the increasing interconnection of markets, the importance of arbitrage for electricity trading will continue to grow.