Battery energy storage revenues across the GB fleet in August fell to the lowest level since September 2020. But what caused the fall?
The Modo Battery Revenue Benchmark for August was £3.4k/MW - equivalent to an annualized £40k/MW/yr.
Any batteries that earned more than this amount (the median revenue of all the assets on the Modo Leaderboard) did better than most across the month.
- August’s revenues were the lowest since September 2020 - the month before Dynamic Containment was launched as a service.
- This was a 43% fall from fleet revenues in July and the lowest seen this year.
Dynamic Containment prices fall to their lowest-ever point
July had seen a resurgence in Dynamic Containment prices following an increase in Dynamic Containment Low procurement volumes. This was short-lived, however, with procurement volumes reducing back down in August to the levels seen earlier in the summer.
This meant that the effects of saturation continued, and prices for the largest frequency response service for battery energy storage are now at their lowest-ever levels.
- Dynamic Containment Low averaged £1.49/MW/h in August, whilst Dynamic Containment High averaged £2.90/MW/h.
- The combined Dynamic Containment price of £4.40/MW/h is 52% lower than in July, and a 17% drop from the previous low in May 2023.
Other frequency response revenues faced the squeeze, too
All four frequency response services saw prices fall in August - Dynamic Regulation with the biggest drop (£8.23/MW/h, -44% from July) alongside Dynamic Containment. This means that National Grid ESO’s spend on these services is now at its lowest point since November 2020 - just one month into the launch of Dynamic Containment Low.
With the battery energy storage fleet bigger than ever, revenues available from these services continue to face the squeeze.
Battery energy storage revenues from energy arbitrage actions continued to increase
Whilst revenues from frequency response services fell in August, revenues from other sources increased. Combined revenues from wholesale trading and the Balancing Mechanism rose to just under £1k/MW - their highest levels since January 2023.
- Balancing Mechanism revenues are at their highest levels since December 2021. Dispatch volumes continue to increase, with a total of 27 GWh in August, up 80% from July!
- Trading revenues fell from July, with lower trading spreads available in the month.
Trading spreads fell slightly, with no repeat of July’s negative prices
Two big negative pricing events dominated wholesale prices in July. This provided rare opportunities for battery energy storage to be paid to charge up in the wholesale market. There were no repeats of this in August, with a low of £14/MWh in the hourly N2EX market on 19th August.
By contrast, two days saw prices rise in the evening following tight conditions. Prices peaked at £194/MWh on 23rd August, and £204/MWh the following day. These were the highest hourly day-ahead prices seen since February. This helped both price spreads exceed £100/MWh on both days.
Energy markets will be key to any recovery of battery revenues heading into autumn
August shows us that saturation of frequency response markets is here to stay.
Dynamic Containment’s price jump in July has been more than reversed, and battery capacity competing for contracts is only going to increase. With no new ancillary markets until the arrival of new reserve markets in early 2024, there’s little on the horizon to change the direction of travel for frequency response prices.
This means that battery owners and operators are likely to be left reliant on an increase in wholesale pricing volatility and balancing mechanism dispatches to see an uptick in revenues.
History has shown this is possible - September 2021 saw record wholesale volatility with low wind speeds and high levels of conventional plant outages. This led to some of the highest battery energy storage revenues we’ve ever seen.
Meanwhile, the momentum behind Balancing Mechanism reform is continuing to grow. National Grid ESO is hosting an event on 3rd October based on a roadmap for reforms. Head here to register!