Falling revenues are leading to changing operational strategies for battery energy storage. This includes changes in how much cycling some operators are willing to perform in the pursuit of additional revenue. Battery energy storage systems averaged more than 1 cycle per day for the first time in Q4 of 2023, a 9% increase from Q3.
In Q3 of 2023, Modo Energy looked at how grid-scale batteries in Great Britain were cycling. After a reduction in October, batteries continued the trend of increasing cycles each quarter throughout 2023.
So, why did this increase in cycling occur? And what batteries and strategies are driving this?
- Batteries averaged over 1 cycle per day for the first time in Q4 2023, a 9% rise from Q3. This increase was mainly driven by one-hour batteries, which saw a 20% increase in daily cycles.
- Higher cycling strategies for one-hour batteries led to higher revenues. This was achieved by focusing on Dynamic Regulation High alongside wholesale trading.
- The composition of Dynamic Regulation High service shifted from being dominated by two-hour batteries to one-hour batteries, which now provide 56% of the service’s volume.
- Cycling twice daily rather than once increased revenues by 38% for one-hour batteries in December. This premium for additional cycling increased from 23% in Q3 following falling revenues.
One-hour batteries are driving increased cycling
The 9% increase in the average number of daily cycles in Q4 was driven by operators turning to higher-cycling strategies in search of higher revenues. This was due to reductions in frequency response prices in November and December following the launch of the Enduring Auction Capability.
One-hour batteries were the main cause of the overall increase in cycles. These systems averaged 1.07 cycles per day across the quarter, a 20% increase from Q3. They hit an all-time high of 1.15 daily cycles in December. By contrast, 2-hour assets averaged 1.08 daily cycles in Q4, 5% lower than in Q3.
Higher cycling strategies led to higher revenues for one-hour batteries
The cycling of batteries is heavily linked to revenue strategy. Systems averaging less than half a cycle predominantly operated in Dynamic Containment. These were hit hardest by the fall in frequency response prices, averaging £28k/MW/year in Q4.
Meanwhile, one-hour batteries averaging two cycles or more per day all followed a strategy focused on , earning up to £50k/MW/year on average. Two-hour batteries pursuing the same strategy cycled half as much.