ESO’s Open Balancing Platform launched in December, the first step in improving dispatch rates for battery energy storage. If successful, this allows batteries to be utilized more, ultimately increasing revenues from the Balancing Mechanism.
But how might dispatch rates improve, and could these improvements increase future revenues?
- Releases to the Operational Balancing Platform should improve how batteries are utilized over the next three years.
- Dispatch rates improve from 1.7% in 2023 to 6% in 2027 in Modo Energy’s central forecast scenario and up to 8% in the high scenario.
- Longer-duration batteries see greater benefit from increased dispatch rates due to operational strategy and greater energy throughput capability.
- Two-hour assets could see an uplift in the present value of lifetime revenues by 13% in the central scenario and 20% in the high scenario.
The Open Balancing Platform introduces three key changes that could improve battery dispatch rates
Battery dispatch rates in the Balancing Mechanism, measured as the percentage of total available energy dispatched by the control room, currently average just 1.7%. Batteries are frequently ‘skipped’ in favor of larger assets that are simpler to dispatch and can be used for longer periods. Improving skip rates should improve dispatch rates and ultimately increase the volume of energy that batteries see dispatched in the Balancing Mechanism.
National Grid ESO launched the Open Balancing Platform in December and has outlined a roadmap of improvements to their dispatch systems. Three of these releases help improve battery dispatch rates via new technology. Meanwhile, the transition from legacy systems could provide wider benefits to dispatch rates once completed. In Modo Energy’s central forecast scenario, this improves dispatch rates to an average of 6% by 2027.
The first of these improvements, Bulk Dispatch, launched in December. This enables the sending of instructions to many batteries simultaneously, created from a single required shape. Currently, the control can only dispatch batteries by sending individual instructions.
ESO will introduce new improvements every quarter through to the end of 2025
Fast Dispatch, expected in Spring 2024, will allow quicker bulk dispatch of assets for time-sensitive frequency-correcting actions. Currently, batteries can be skipped in favor of larger assets that can be dispatched quickly as a single unit, for example, during a recent interconnector trip. Alongside bulk dispatch, this removes technical barriers to dispatch, allowing batteries to be dispatched more often for volumes they currently compete for.
Due in late 2024, new energy storage parameters effectively end the ‘15-minute rule’ that currently limits batteries to shorter dispatches. Most Balancing Mechanism volume is provided by dispatches longer than 15 minutes, which is a key cause of skips today. Enabling batteries to be used for 30-minute dispatches could increase the proportion of volumes that batteries compete for from 24% to 69% of total volume. This effectively increases the depth of the market for batteries.
These improvements lay the groundwork for increased dispatch rates, but exact improvements will depend on how control room engineers utilize the new systems. This creates uncertainty over how quickly dispatch rates may increase, if at all. In our central forecast scenario, battery dispatch rates will improve to an average of 6% by 2027 but 8% in the high case. In the low case, dispatch rates increase minimally to just 2%.
Cycling constraints ultimately limit dispatch rate increases
Increased dispatch rates mean higher volumes of energy being dispatched for batteries via the Balancing Mechanism. Batteries have limits on their cycling as a warranty condition to limit cell degradation. Typically, this is between one and three daily cycles. This means the benefit of increased dispatch rates reduces above a certain level.
A dispatch rate of 8% would see a one-hour battery cycling twice per day if it operated solely in the Balancing Mechanism. Two-hour assets can see twice the energy throughput for the same cycling. As a result, dispatch rates can reach higher levels for these systems before reaching any cycling limit. A two-hour battery could cycle twice daily with dispatch rates up to 17%.
In reality, batteries operate in other markets and do not maintain 100% availability in the Balancing Mechanism. However, longer-duration batteries can ultimately see a greater benefit from increasing dispatch rates.
This is the case in our central forecast scenario. Compared to current dispatch rates, the present value of lifetime revenues increases by 6% for a one-hour system but 13% for a two-hour system. The difference is even greater in the high scenario.
Differences in operational strategies also see longer-duration batteries benefit more
Overall, longer-duration assets stand to benefit more from increases in dispatch rates. These assets can better take advantage of the additional dispatches available because of the link to cycling. However, the impact of cycling constraints is not the only determining factor causing this difference. The operating strategy of these systems also plays a role, particularly in how much time a system spends contracted in frequency response.
Shorter duration assets spend more time in frequency response and less in the Balancing Mechanism
Shorter duration assets are more likely to pursue a frequency response-led strategy. They earn less from trading than longer-duration systems, meaning they are willing to provide frequency response at a lower price. Dynamic Containment and Moderation carry little premium for additional duration, meaning one-hour assets can earn revenues similar to two-hour assets through the service.
In our central forecast scenario, a one-hour asset has a much greater proportion of its capacity contracted in frequency response services. Dynamic Regulation is the only frequency response service that two-hour assets contract more than 5% of their capacity in. It is mainly used to charge the battery cheaply via the high service, with energy resold in wholesale markets.
This means that one-hour systems have less availability for Bids and Offers. When capacity is contracted in frequency response services, it cannot be made available in the Balancing Mechanism. The lower availability of one-hour systems and the reduced benefit of higher dispatch rates because of cycling constraints mean the Balancing Mechanism remains a small portion of total revenues for these assets. The proportion of revenues increases from just 1% in 2023 to 9% in 2027.
Improving Balancing Mechanism dispatch rates increases its importance for two-hour systems
For a two-hour battery, Balancing Mechanism revenues increase from 5% of total revenues in 2023 to 29% in 2027 in our central scenario. This helps to increase overall revenues by 46%, alongside greater trading value.
These strategic differences mean the revenues of two-hour assets are much more sensitive to the success of the Open Balancing Platform rollout than one-hour systems. If dispatch rates increase to 6%, as in our central scenario, additional Balancing Mechanism value could provide an uplift to revenues of 17% in 2027, compared to the low scenario.
As the Balancing Mechanism becomes a more important part of the revenue stack over time, the uplift in revenues increases. This revenue uplift increases to as high as 26% in 2046. At present values, total revenues could increase by 13% in our central scenario and 20% in our high scenario.
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