Frequency response markets remain hugely lucrative for battery energy storage. The last two months have seen all-time high revenues. Because of the revenues available in frequency response markets, recent battery activity in the Balancing Mechanism (BM) has been minimal. In 2022, BM revenues have made up just 1.56% of the total stack. Figure 1 (below) shows total battery energy storage BM revenues over the past twelve months.
* The negative revenues we see prior to November represent batteries having bids accepted to turn down in the BM. This is because, before November, there was only a low-frequency (exporting) Dynamic Containment service, meaning batteries were turning down in the BM to manage their state of charge. (Despite the negative revenues shown here, this represents a cheaper way to charge than other options - namely purchasing power in the wholesale markets.) The launch of the high-frequency (importing) Dynamic Containment service has changed the behaviour of batteries in the BM.
However, as (and when) frequency response markets become saturated, we may see batteries participate in the BM more. So, we’ve taken a look through National Grid ESO’s dispatch transparency dataset - which aims to increase transparency around operational decision-making in the BM.
‘System’ actions vs. ‘energy’ actions
The dispatch transparency dataset logs every action taken in the BM. It logs which assets have been turned up or down, and the times these actions are taken. Crucially, it also logs why.
There are two broad categories of actions - ‘system’ actions, and ‘energy’ actions. Figure 2 (below) shows the breakdown of all BM actions taken across the past twelve months.
‘System’ actions
‘System’ actions respond to the following limits on the system:
- Thermal limits.
- Voltage limits.
- RoCoF or inertia limits.
- Stability limits.
However, the dataset simply tags all of these actions as ‘system’ - so we can’t see which specific type of limit a ‘system’ action is being taken to satisfy.
‘Energy’ actions
‘Energy’ actions, on the other hand, are broken down into further subcategories - or reasons - within the dataset. Figure 3 (below) shows these all ‘energy’ actions taken over the past twelve months, broken down by reason.
- ‘Geometry’ actions are taken “where previous actions might lead to an unacceptable shape for a BMU to follow”. BOAs are issued to ensure that the most economical solution is found, while the ESO can satisfy its needs across all settlement periods. This might mean, for example, asking a CCGT to continue to generate even when the ESO doesn’t need it to, and then finding another asset to turn down in order to balance that generation - because asking the CCGT to ramp down and back up would be more expensive. ‘Geometry’ actions are also taken “where previous actions might lead to an unacceptable shape for frequency management”.
- ‘Response’ actions are taken “where the BMU is providing or being positioned to provide response in a settlement period, or across settlement periods, if positioning/returns abridge the adjacent settlement period”. This may refer to an action bleeding into another settlement period, and/or to any action subsequently taken to adjust for that.
- ‘Unit commitment’ actions are those that need to continue due to minimum non-zero times and minimum zero times.
- ‘Merit’ actions don’t fall into any of the above categories, but are cheaper than alternative BOAs.
- ‘Alternative’ actions don’t fall into any of the above categories, and are not cheaper than alternative BOAs. (‘Alternative’ actions are further subcategorised by reason.)
* These descriptions are largely taken from the dispatch transparency methodology documentation. If there are areas of these explanations that you think could be improved, please get in touch and let us know.
What actions are batteries taking?
Figure 4 (below) shows the reasons battery energy storage assets are utilised for ‘energy’ actions.
- Overall BESS actions in the BM have dropped off significantly in 2022. There were 58% fewer actions taken in the first seven months of 2022 (January to July) than in the last five months of 2021.
- ‘Merit’ actions made up 39.4% of all ‘energy’ actions taken by batteries - the most common reason. When all assets (of all technology types) are taken into account, this figure drops to 26.4%. This tells us that BESS assets are utilised primarily for their cheaper prices more often than other asset classes.
- ‘Alternative’ actions made up 33.3% of all ‘energy’ actions taken by batteries. When all assets (of all technology types) are taken into account, this figure drops to just 7.8%. This means batteries are over four times more likely to provide ‘alternative’ actions than other asset classes.
What is meant by ‘alternative’ actions?
Figure 5 (below) shows the reasons BESS is being used to take ‘alternative’ actions in the BM. However, an ‘alternative’ action may be taken for more than one reason - e.g. one ‘alternative’ action may actually be used to manage both frequency and a local constraint.
- The two biggest reasons batteries are used for ‘alternative’ actions are to manage local constraints (‘zonal management’) and frequency. These account for 84% of ‘alternative’ actions taken by BESS assets.
Now we’ve seen the reasons batteries are being used in the BM, it’s time to look at the reasons why they are not. This is known as being ‘skipped’.
When batteries get ‘skipped’...
When an asset is ‘skipped’, it means that another asset is dispatched (to take an ‘alternative’ action) despite the ‘skipped’ asset being priced in cheaper (i.e. being further up the stack). Figure 6 (below) shows the number of instances where BESS assets were ‘skipped’ in favour of another asset.
- In line with what we saw in figure 1, BESS activity in the BM (including that which is ‘skipped’) has moved away from almost exclusively bids (to turn down) pre-November, to majority offers (to turn up) over time.
Why are batteries being ‘skipped’?
Figure 7 (below) highlights the reasons BESS assets were skipped. In some cases, multiple reasons have been given for a single ‘alternative’ action.
- The three main reasons BESS assets are ‘skipped’ in the BM are: zonal management, frequency, and being ‘incomplete’. Incomplete means that the rejected action is unable to meet the necessary requirement volume.
- These three reasons account for 90% of all ‘skipped’ BESS actions.
What’s being used instead of battery energy storage?
In figure 8 (below), we can see which fuel types are being used when BESS assets are ‘skipped’.
- The main alternative sources of flexibility when batteries are ‘skipped’ - when they are top of the stack - are pumped storage and CCGTs.
- Pumped storage is, in a sense, the classical battery of the energy system. It balances the system by discharging vast amounts of power at short notice.
- CCGTs are being used even when batteries are in the merit order. This is probably for longer duration actions that BESS assets might be unsuitable for.
- That said, there is a massive opportunity for batteries to participate across the board to contribute to these actions - and provide gas-free balancing to the system in the process!
Which batteries get ‘skipped’ the most?
The batteries that make the most bids and offers in the BM are largely the assets which get ‘skipped’ most times. Figure 9 (below) shows how many times batteries were ‘skipped’ in the past twelve months - on an asset-by-asset basis.
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