14 Feb 2023
Matt Middleton

Battery energy storage: what you need to know from the Quarterly Calls covering Q4 2022

A round-up of the most important trends and news for battery energy storage, as discussed during our Quarterly Call season.

What are our Quarterly Calls?

Our Quarterly Calls are bespoke conversations with your team. In them, we look at trends and news from the world of battery energy storage from the previous quarter. These are exclusive to users on our Enterprise subscription.

The Quarterly Calls share an informative collection of charts, accompanied by commentary and conversation on surrounding battery energy storage topics, plus a lively Q&A session at the end too.

So what’s in this round-up?

We’ve captured the key points from these sessions for those users who want access to the insights at a time that suits them. You can watch the summary with Matt Middleton (Account Manager) or check out all of the slides and graphs in the article below.

Q4 Quarterly Call highlights shared by Matt.

So, let’s jump into everything you need to know from Q4 (October - December) 2022.

What’s new at Modo?

The big news from Modo for Q4.
  • The Leaderboard is even more accurate, and you can now customize Leaderboard views.
  • You can discover your own trends and patterns with the Plotter tool.
  • And the fundaments of Signal have been enhanced. It also now includes dispatch in a wider selection of markets (Balancing Mechanism).
  • On top of this, the Modo family continues to grow! We welcomed a new analyst, greater support for the product, and Clare to lead on Content & Community!

2023 will mark the start of a new era for GB battery energy storage

1. The GB battery energy storage fleet grew by 27% during Q4

New entrants to the market across Q4 2022.
  • The installed capacity climbed to over 2 GW by the end of Q4! This is because a whopping 433 MW of capacity became operational between October and December.
  • Two large assets in the region of 100MW, Pillswood and Capenhurst, came online. As a result, the average duration of the GB fleet rose to 1.15 hours. This indicates the trend toward batteries with larger capacities and longer durations.
  • A 10 MW asset DC-coupled with 23 MWp solar entered the market. We expect the trend towards co-located assets (AC- or DC-coupled) to continue over the coming months.

2. Saturation drove prices in the Dynamic suite down by 80% across Q3 and Q4

The volume-weighted average clearing price of the Dynamic Suite services from June 2022 to January 2023.
  • Saturation has arrived in the Dynamic suite! This is linked to the significant increase in installed battery energy storage capacity.
  • The previously lucrative Dynamic Containment Low service in Q3 often cleared below £5 /MW/hr in Q4.
  • The Dynamic Regulation Low service was the most stable market in Q4 due to the high cycling required for assets.

3. Benchmark revenues for battery energy storage dropped 41% in Q4 compared to Q3

Revenue benchmark (£/MW/yr) from October 2020 to December 2022.
  • Warmer temperatures, higher wind generation and lower-priced Liquefied Natural Gas (LNG) imports squeezed wholesale revenues to lower-than-expected prices.
  • In December, the revenues generated across the fleet from wholesale (38%) outstripped those earned in Dynamic Containment (28%) for the first time.
  • This reflected lower Dynamic Containment prices with the saturation of the market.

4. Firm Frequency Response proved the most lucrative operational strategy for battery energy storage

Leaderboard of assets based on revenues (£k/MW/yr) across Q4.
  • National Grid ESO procures Firm Frequency Response (FFR) on a month-ahead basis, and providers submit bids based on the expected value of wholesale trading and Dynamic frequency response services.
  • High volatility and large price spreads were expected in the wholesale market across October, November and December, increasing FFR prices.
  • However, the anticipated high volatility and price spreads didn’t materialize due to warmer temperatures, higher wind generation, and greater-than-expected LNG availability.
  • As a result, assets in FFR performed very well across the quarter, with 1-hour systems being very competitive against 2-hour systems.

5. Red Scar demonstrated high revenue agility and an ability to capture revenues from the elusive Balancing Mechanism

Revenues generated by the 49 MW / 74.3 MWh asset Red Scar across Q4 with market splits.
  • National Grid ESO dispatched Red Scar in the Balancing Mechanism more often than the rest of the GB fleet.
  • The asset’s location also contributed to these activations, being able to provide flexibility to manage grid constraints e.g., around high wind generation.
  • Red Scar also participated in Dynamic Moderation, a typically under-subscribed service for battery assets, a sign of the oversaturation of Dynamic Containment.
  • The site captured a large proportion of its December revenue in one day in the wholesale markets, which we will come onto next...

6. Operators did everything they could to capitalize on the wholesale price spreads on 12th December 2022

Operational strategy of optimizers in the GB fleet on 12th December 2022.
  • Most operators dispatched in the evening peak on 12th December to take advantage of the wholesale prices peaking at £1,846 /MW (Nordpool)
  • There was an unusual number of assets importing at 3 pm. We expect that assets exited ancillary services (at the end of EFA block 4) and charged up to maximize their state of charge before the evening peak.
  • In doing so, the GB battery energy storage fleet showed it can now pack a punch the size of a CCGT plant. This speaks volumes for its future potential in balancing the system.

7. In the next three years, we will see seasonal variations in revenues available to battery assets, with wholesale and Dynamic Containment making up the majority of the stack

Signal projection of GB battery revenues for the next three years.
  • Revenues are expected to be more significant in the winter than in summer.
  • This is due to expected higher wholesale prices and the opportunity cost calculations undertaken by frequency response service providers.
  • Despite higher renewable generation and lower thermal generation in the summer months (which will reduce system inertia), the increased requirement for frequency balancing services is not expected to counteract the lower wholesale prices across the season.
  • However, wholesale revenues are expected to make up a significant proportion of the revenue stack for battery assets from now on.
  • Additionally, revenues from FFR will start to decrease with the gradual phasing out of the service by National Grid ESO from March 2023.
  • Balancing Mechanism revenues are expected to contribute more to the revenue stack with planned improvements to the National Grid ESO control room (previously expected to commence in September but now pushed back to December 2023 or later).
  • Over the next three years, the average annual revenue for a 1.15-hour system will be £70.6k /MW/yr.

8. Revenues from the Balancing Mechanism for battery assets are expected to increase significantly with National Grid control room improvements

Expected revenues (£k/MW/yr) for battery assets from the Balancing Mechanisms from January 2022 to January 2026.
  • Revenues from the Balancing Mechanism during 2022 have typically been under 2.5% of total revenues for battery assets.
  • The Open Balancing Platform in the control room will change how National Grid ESO dispatches assets, and it is expected to decrease the skip rates that energy storage sites experience.
  • As a result, this should enable more of the GB fleet to participate in the balancing system and capitalize on its revenues.
  • With greater and greater saturation in the ancillary markets, more battery assets will turn to wholesale and Balancing Mechanism strategies. This additional revenue stream will be critical to storage business cases.

If you’re an Enterprise user and want to book your Quarterly Call for next quarter, make sure to get in touch with us via Intercom (the little blue circle in the bottom-right of your screen).

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