January 2023 Leaderboard: understanding the Benchmark

The (Even Better) Leaderboard is here! The calculation of the Leaderboard now includes 1hz system frequency data to improve its accuracy. Read more about our even better Leaderboard and Benchmark calculations here.

To go alongside the publication of our January Leaderboard, Alex and Imrith discuss the market trends that have shaped this month's battery energy storage revenue benchmark. Plus subscribers can also dive deeper into these revenues on an asset-by-asset basis - so check those out.

New assets enter the markets

In January 2023, three new assets (>5 MW) provided a Dynamic Frequency Response service for the first time. Table 1 (below) outlines their details and when they were first accepted to provide one of the three services (Dynamic Containment, Dynamic Moderation, and Dynamic Regulation).

Fleet revenues

Figure 1 (below) shows the average fleet revenues for battery energy storage system (BESS) assets in Great Britain (GB) from January 2020 to January 2023 inclusive.

In January 2023, mean average earnings (£/MW) for BESS assets decreased by 31.22% from the previous month - to an annualized revenue of just £74,776/MW. This is the lowest it has been since October 2020 when the Dynamic Containment service launched.

Dynamic frequency response services

Figure 2 (below) shows the average clearing prices (volume-weighted) in Dynamic frequency response services for January 2023.

• On average, low-frequency Dynamic Containment cleared at £4.70/MW/h. This was the lowest average monthly clearing price since the service launched in October 2020.
• The average clearing price for providing Dynamic Containment symmetrically (at 90% rated power) was £6.78/MW/h.

Dynamic Regulation

Figure 3 (below) shows accepted and rejected bid volumes in both low- and high-frequency Dynamic Regulation services.

• An increased price cap in low-frequency Dynamic Regulation in January, and a low volume of bids, meant average clearing prices increased from £9.39/MW/h (December) last month to £17.03/MW/h.
• Bid volumes increased in the low-frequency service towards the end of the month, potentially due to a new trend using a looped High / Low bidding strategy to effectively create negative bid prices in the high-frequency Dynamic Regulation service.
• This bidding strategy increases the chances of a provider's acceptance into the now highly popular (and oversubscribed) service by effectively providing the low-frequency service at a reduced price (You can read more about that strategy here).

Firm Frequency Response

Figure 4 (below) shows bids accepted, by EFA block, in Firm Frequency Response - for the 21 Leaderboard assets that delivered the service in January.

• 21 Leaderboard assets provided Firm Frequency Response in January -three more than last month.
• On average, prices in EFA blocks 1-4 (11pm-3pm) were £12.82/MW/h. Average prices for EFA blocks 5 and 6 were £29.27/MW/h.
• The Firm Frequency Response auction is pay-as-bid. There was a wide spread of accepted bids, ranging from £8.90/MW/h (in EFA blocks 1 and 2) to £33.09/MW/h (EFA blocks 5 and 6).

Battery energy storage in the Balancing Mechanism

In January 2023, Balancing Mechanism revenues made up 4.40% of GB battery energy storage revenues (£3,287/MW). While still not a large proportion, this is a noticeable increase on December 2022’s 2.48%, largely driven by the lower revenues available in other markets.

Figure 5 (below) shows the daily Balancing Mechanism revenues for all Balancing Mechanism-registered battery energy storage assets.

Wholesale prices

The average daily spread available in January 2023 was £115.68/MWh. This was 50.2% lower than in December (£232.44/MWh). Figure 6 (below) shows the average daily spread available using an average price from both Nordpool’s and EPEX’s day-ahead hourly auctions.

Triads

This winter 2022/2023, we are estimating Triad revenues each month as part of the Leaderboard. This is to have greater visibility on optimization decisions around Triads. You can read more about our methodology in full here. Following our methodology, there is an expectation of at least one Triad in January 2022.

There is potential for a Triad in settlement period 36 on 23rd January. Therefore, we have assigned revenues to assets dispatched during this period that are eligible to receive Triad revenues.

Figure 7 (below) shows the highest daily initial demand out-turn (in a single settlement period) in December against the minimum Triad demand value.

What influenced the Modo Benchmark in January 2023?

The Modo Benchmark for January 2023 was £6,476/MW. This is the median revenue for the GB battery fleet. Assets earning more than this could be considered more successful than the average. (We have updated our methodology for calculating our Benchmark - you can read more here.)

Figure 8 (below) shows a breakdown of annualized battery energy storage fleet revenues for January 2023.

Record-low average clearing prices in low-frequency Dynamic Containment saw the value of the main battery energy storage market fall for the seventh month in a row - from the all-time high seen in June 2022 of £38.08/MW/h to the January 2023 all-time low of £4.70/MW/h. This, coupled with a 50.2% reduction in the average spread available in wholesale markets, saw BESS fleet revenues fall to their lowest level since Dynamic Containment launched in October 2020.

Monthly Firm Frequency Response made up the largest proportion (34.9%) of total revenues for BESS in January 2023. With the average contract value for February 2023 delivery in the service falling 13% to £15.73/MW/h, it’ll be interesting to see how revenues compare to January at the end of the month, given the current saturation across all frequency response markets.