Significant revisions to Dynamic Containment (DC) volume requirements in November 2021 meant that battery energy storage system (BESS) assets could no longer solely rely on the service for revenue. BESS asset owners and operators have been pursuing alternative options to fill the revenue gap DC so consistently provided.
In the video below, I explain what BESS is doing in the BM:
Prior to November, the Balancing Mechanism (BM) was primarily utilised by BESS for state-of-charge management when providing DC. This was for turndown, as assets were only providing the low-frequency response DC service (see Alex’s DC-BM stacking piece). However, since the changes to DC in November 2021 (volume requirement revisions and launch of the high-frequency response service), BM volume for accepted offers has slowly started to pick up. This is highlighted in Figure 1 (below) which shows the daily volume dispatched by BESS assets in the BM.
Now that we have three months of data (1 November 2022 - 31 January 2022), in this article we’ll assess how assets are participating in the BM and analyse how BESS is being utilised by looking at the following:
- Dispatched volumes.
- How long assets are being dispatched.
- When assets are being dispatched.
- Revenues.
Volume dispatched
Figure 2 (below), shows a summary of the total volume dispatched by Balancing Mechanism Unit (BMU) BESS assets (539.5 MW) in the BM between November 2021 - January 2022.
BESS was utilised equally for both offer and bid acceptances, with turndown actions making up 50.5% of the total volume dispatched in the BM.
Which assets are providing this balancing demand?
Figure 3 (below), shows the seventeen BMU registered assets that have contributed to the balancing volume provided by BESS in the BM during the last three months.
- On average, each asset provided 5.33MWh/MW of turndown through accepted bids.
- Four assets provided 69% of all offer volume dispatched by BESS in the BM during November 2021 - January 2022. (Kemsley, Red Scar, Thurcroft, and Wickham Market.)
- BM participation is comparatively lower in some assets. In some cases, this is due to operational strategy. For example, Breach Farm, Larport Farm, and Lower Road participated in FFR throughout the entirety of this time period, solely providing the service for two of the months.
- Kemsley provided most of the balancing volume for BESS in the BM, being one of two assets to not provide FFR at any point during the last three months. The other asset was Contego, which has the lowest total dispatched volume in the BM.
How long are BESS assets being dispatched for?
Given the current uncertainty in how much BESS frequency response services will be able to accommodate in the near future, increased BM activity is great news for BESS asset owners and operators. But how is BESS being utilised in the BM?
Figure 4 (below) shows all BESS balancing actions in the BM, highlighting the volume dispatched (MWh) and how long (minutes) assets were dispatched for (November 2021 - January 2022).
- The average dispatch time for BESS was ~12 minutes during the last three months.
- 84.4% (1,238) of all BESS dispatches in the BM lasted less than or equal to 10 minutes.
- During this timeframe, Thurcroft was dispatched for the longest amount of time (87 minutes), where it provided 41.56 MWh of balancing volume.
- Red Scar provided the largest amount of balancing demand (59.48 MWh), in which it was utilised for 82 minutes.
Figure 5 (below) shows how long individual assets were dispatched for in the BM (November 2021 - January 2021).
When are assets being dispatched?
Figure 6 (below) shows the volume traded (MWh) by BESS assets in each settlement period (November 2021 - January 2022).
Volume dispatched through offer acceptances are concentrated around peak demand times, with most of the volume traded during the morning pickup (EFA block 3). This compares to bid acceptance volumes which are more distributed, highlighting a potential opportunity for assets looking to turndown at any time throughout the day.
Revenue and performance
Before evaluating how assets have performed in the BM, let’s assess the pricing levels BESS was accepted at, to get an indication of the sort of prices required to be competitive in order to get dispatched.
Figure 7 (below) shows the average accepted daily Bid-Offer-Acceptance (BOA) prices (volume-weighted) for BESS assets in the BM (November 2021 - January 2022).
- The average prices were £324.57/MWh and £90.99/MWh for accepted bids and offers, respectively.
- The highest average accepted offer price was £1,995.98/MWh, on 11th November 2021. This was largely due to Thurcroft being accepted to dispatch 14.5 MWh at £9,999.0/MWh in settlement period 36 on that day.
Figure 8 (below) shows the cumulative revenues of BESS assets in the BM, from November 2021 to January 2022.
- Thurcroft cumulated the largest revenues (£5,665/MW) in the BM during the last three months, largely due to the huge acceptance (as mentioned above), which was responsible for £2,700/MW (46.7%) of this total.
- The top eight assets earned on average £3,111/MW, with the cumulative total representing 9.39% of their revenues across all markets in the last three months.
- This compares to the bottom nine earning assets, which all had revenues under £500/MW. However, this is largely indicative of a lack of participation in the BM due to pursuing alternative trading strategies.
Final thoughts
Competition in frequency response services is continuing to increase. New BESS assets are continually being energised and legacy markets (EFR and FFR) are being retired. In this article, we have looked at the ways in which BESS has been utilised in the BM, how assets have participated, and the potential revenue opportunities the market has to offer. Currently, BESS is being utilised for short periods of time (~12 minutes) and for low volumes (~4.83 MWh). With the BESS revenue stack likely to become more dependent on arbitrage strategies in the distant future, it’ll be interesting to take a look at how much more BESS the Balancing Market accommodates and how asset utilisation changes in the coming months.