On August 21st, battery energy storage systems in Great Britain earned the second-highest daily total so far in 2024: £250/MW. This is marginally lower than the £258/MW batteries earned on April 16th. This revenue increase came alongside further periods of negative prices, with 49 hours of negative prices so far in August.
So what has caused this increase in negative prices, why have battery revenues risen, and how did batteries operate during these conditions?
Negative prices for 34 hours across seven days in late August
Day-ahead wholesale power prices were negative for 49 hours in August. Only April has seen more negative-priced hours (53) with three days of August remaining. 34 hours of this came in the 7-day period between 20th and 26th August.
This means that GB has seen a total of 147 hours of negative wholesale prices. This is 44 more than in all of 2023 and keeps the number of negative-priced hours on track to exceed the 188 hours projected in our forecast.
Increased wind generation combined with low demand caused negative prices
During the seven days between August 20th and 26th, wind generation averaged 9.8 GW, reaching its highest level since April. This met an average of 41% of national demand, which has fallen throughout the summer to average a low of 24 GW across the week. These two factors combined to cause 34 hours of negative prices at times when the gap between wind and demand narrowed - this is the most GB has seen in a seven-day period in 2024.
This compares to the two weeks in April that saw a total of 53 hours of negative pricing. Between April 3rd and 16th, wind generation averaged 11.5 GW. This meant that wind generation could meet over 40% of national electricity demand, which was 27 GW on average.
BESS revenues averaged £77k/MW/year between August 20th and 26th
The rise in negative-priced periods helped to increase battery revenues in late August. The low wholesale price minimums led to a rise in price spreads, increasing wholesale revenues and frequency response prices.
In the week commencing August 20th, frequency response revenues averaged £65/MW/day (£23k/MW/Year), triple the figure for the rest of August. This helped batteries earn an average of £77k/MW/year across the week. Single-day revenues peaked on August 21st, reaching their second-highest level of the year.
Balancing Mechanism Offers helped increase battery revenues
Low and negative wholesale prices during off-peak periods allowed batteries to charge up cheaply on August 21st. Price peaks of £69/MWh in the morning and £87/MWh in the evening helped batteries earn a total of £94/MW from wholesale trading on average.
However, despite a favorable price shape on August 21st, batteries actually earned more wholesale revenue on August 19th. The greater total revenue on the 21st was due to higher frequency response prices, and actions taken by the ESO buying power from batteries in the Balancing Mechanism.
Batteries provided over 600 MW of power through the Balancing Mechanism at 1 p.m. This gave batteries a third opportunity to profitably sell power during the day, helping them earn £47/MW from the Balancing Mechanism on top of their wholesale and frequency response revenues.
National demand is just as important as wind generation
Recently, battery revenues have been strongly linked to wind generation, but national demand also plays a key role in determining how batteries earn revenue. While negative prices can provide high revenue opportunities for batteries, they don’t always. On August 25th, prices were negative for 15 hours, the most in a single day, the same as on April 6th. However, batteries earned £205/MW and £186/MW on these days, which is 20-25% lower than on August 21st and April 16th.
This is due to the shape of wholesale prices these days, which were driven by national demand - which is demand net of embedded wind and importantly, solar.
Lower morning demand on April 6th and August 25th meant there were no morning price peaks on these days. Meanwhile, the high-revenue days had two clear wholesale price peaks, giving batteries more opportunities to generate revenue.
As we enter the ‘shoulder’ months of September and October, demand peaks will begin to increase, and this could be good news for batteries. It could mean we enter the ‘goldilocks zone’ more often: where wind and solar generation can meet enough of demand during off-peak hours to cause prices to fall, but we still need more expensive generation - like CCGTs - running at peak times.