Negative power prices mean battery energy storage can be paid to charge - and then paid again to discharge, when prices turn positive later. These opportunities have been rare for batteries - until this month. We’ve now seen negative power prices on two different weekends in July, including this weekend just gone (the 15th and 16th).
On Sunday 2nd July, power prices hit all-time record lows:
- Prices in the GB EPEX hourly day-ahead market fell to £-75/MWh.
- In other GB markets, prices dropped as low as £-120/MWh.
- Elsewhere in Europe, prices fell to £-500/MWh.
So, how did batteries in Great Britain respond? And what did these negative prices mean for revenues?
A surplus of generation led to negative prices
Negative prices occur when there is too much generation available - basically, that surplus requires a payment to turn down. This is exactly what happened on Sunday 2nd July.
- Wind generation peaked at 14 GW - and could have reached 18 GW, without actions taken in the Balancing Mechanism.
- Combined with 6 GW of solar generation and 5 GW of nuclear, this was almost enough to meet national demand.
- Meanwhile, there were similar conditions in Europe. With even lower prices in some countries (e.g. £-500/MWh in the Netherlands), interconnectors were importing power to Great Britain - even though Britain didn’t need it.
This combination pushed prices to record lows.
How did batteries respond?
The battery fleet absorbed 1.3 GWh of energy during the negative prices
Negative prices mean batteries can be paid to charge - and then paid again to discharge, when prices turn positive later.
This happened on 2nd July. Overall, batteries imported heavily across the negatively priced part of the day.
- Imports peaked at 400 MW, at 14:30 - when prices reached their lowest point.
- Exports peaked at 300 MW, at 21:00.
- Batteries received 370 MWh of dispatches in the Balancing Mechanism across the day - but this made up just 0.2% of the total volume of Balancing Mechanism actions taken.
- Frequency response resulted in net exports from batteries, as frequency mostly remained low during the day.
Most batteries remained contracted in frequency response services
On 2nd July, most of Great Britain’s batteries were contracted into some form of frequency response service.
- Across the day, an average 1.58 GW of battery capacity was contracted into high-frequency response services, and an average 1.44 GW was contracted into low-frequency response services.
- This meant the majority of the battery fleet was unable to trade during the negative prices.
- Dynamic Regulation High volumes fell to their lowest level since November 2022.
- No batteries bid to provide Dynamic Moderation - they decided to participate in other markets, instead.
Negative prices got the attention - but frequency response dominated revenues
Despite the trading opportunities provided by the record negative prices, frequency response still made up the bulk of battery energy storage revenues.
- Only three Balancing Mechanism-registered batteries provided no frequency response on the day.
- Wholesale trading made up 18% of revenues - well above the 8% average seen in June.
- The median battery revenue on this day was £388/MW - three times higher than the June benchmark.
So, let’s take a look at how three different systems responded to the negative prices.
How did specific assets respond?
Case study #1: Hawkers Hill took advantage of high prices in Dynamic Regulation Low
Hawkers Hill is a 20 MW, two-hour battery - owned by TagEnergy, and operated by Tesla. It was by far the most successful battery, in terms of revenues, on 2nd July.
But why?
- It was the only Balancing Mechanism-registered battery to provide more low-frequency Dynamic Regulation (DRL) than high-frequency Dynamic Regulation (DRH) on 2nd July.
- It managed its state of charge by using the wholesale market to charge up during the periods of negative pricing.
- DRL made up 73% of its revenues on the day - prices averaged £27/MW/hr in the service.
- Its wholesale actions mostly took place on the intraday market. This is because providers of Dynamic Regulation don’t know in advance of delivery how much energy they will have to charge or discharge.
- Charging up in the wholesale market, at negative prices, made up 13% of its revenues.
- The system performed approximately 1.6 discharge cycles over the day.
Dynamic Regulation Low provided an unusual opportunity
Dynamic Regulation High has been one of the most popular services since it launched in April 2022. This is because, for Balancing Mechanism-registered systems, ABSVD means energy volumes delivered do not count towards a system’s imbalance position. This means batteries can charge for free, and sell this energy into the wholesale markets.
However, with prices going negative for much of the day, this dynamic was reversed. Dynamic Regulation Low offered the opportunity to discharge during negative prices at no cost - and then get paid to charge up in the wholesale market.
Case study #2: West Gourdie stacked trading around its Dynamic Containment contracts
West Gourdie is a 50 MW, one-hour battery - owned by Foresight Group, and operated by Flexitricity. It was another of the top revenue earners on the day.
- The majority of its revenues came from Dynamic Containment.
- However, it was able to stack trading actions on top of this to take advantage of negative prices.
- 83% of West Gourdie’s revenues came from Dynamic Containment - mostly the low-frequency service, where prices averaged £13/MW/hr.
- The system left space around these contracts to charge up during negative prices, and discharge in the evening. This accounted for the remaining 17% of revenues.
- The system cycled approximately 0.9 times on the day.
An increase in Dynamic Containment Low volumes - and changes in bidding behavior - led to a jump in prices
On 2nd July, National Grid ESO increased its Dynamic Containment Low volume requirements by around 200 MW - to a record 1.4 GW.
In the operational forum on 12th July, the ESO confirmed that this increase was because of the risks created by frequency oscillations in Scotland.
However, this increase wasn’t solely responsible for the higher prices - the market was still saturated. The high prices happened because batteries were bidding in at higher levels - because of the opportunities created elsewhere by the negative prices. Because of all of this, the auction cleared at its highest price since March.
Case study #3: Dollymans focused on wholesale trading and Balancing Mechanism actions
Dollymans is a 100 MW, one-hour battery - owned by Statera, and operated by Statkraft.
Since it started operations in June, it has earned all of its revenues from wholesale trading and the Balancing Mechansim. It is yet to participate in frequency response services.
The 2nd July was no different - Dollymans focused on trading, while receiving dispatches in the Balancing Mechanism.
- Trading actions accounted for 61% of Dollymans’ revenues on the day.
- Balancing Mechanism actions accounted for the remaining 39%.
- The £93/MW earned from Balancing Mechanism actions was by far the highest of all batteries on the day - more than double the next highest asset.
- This came at a cycling cost - Dollymans did approximately 2.3 cycles over the day.
Intraday prices provided an opportunity - but few took advantage
Even though prices in the day-ahead hourly auctions remained solidly negative throughout the day, other markets saw prices briefly turn positive.
This meant that there was an additional opportunity for batteries to charge and discharge - ahead of the most lucrative point later in the day.
- Statkraft was the main optimizer to take advantage of this - its batteries exported almost 100 MWh, across two separate periods in the morning.
- Dollymans’ actions accounted for one-third of this volume.
Are more negative prices on the horizon?
Negative power prices have been rare in Great Britain - 2nd July was the first instance since January. But the weekend of 15th and 16th July provided yet another example of how negative prices can come about given the right conditions.
These conditions seem likely to increase in frequency in the coming years. More wind and solar capacity is coming online, here and in Europe - and demand is unlikely to increase significantly this decade.
However, some factors actually work to suppress the likelihood of negative pricing:
- CfD contracts since Allocation Round 4 contain clauses that negate strike prices when wholesale prices turn negative. This means these plants should turn off once prices reach zero.
- Renewables operating under older subsidies, which look for payment to turn off, will see these contracts start to expire from 2027.
- Nuclear power stations continue to retire, which currently run through negative prices.
- Increased storage capacity - and other flexible demand, such as electrolyzers - will increase imports when prices are low, raising demand.
But, for now, increasing wind and solar capacity mean that negative prices are likely to become a more common occurrence in the next few years. It will be interesting to see how batteries respond to such events in the future.