The GB BESS Index was £1,870/MW in January 2024. This was a 24% reduction from December 2023. Falling frequency response prices mean the revenue stack for batteries in Great Britain has seen a complete reshuffle in the last three months.
The GB BESS Index represents the average revenue of Balancing Mechanism-registered batteries across frequency response, wholesale trading, and the Balancing Mechanism.
- Revenues from the Balancing Mechanism overtook frequency response revenues for the first time ever.
- The Capacity Market generated an additional £1.3k/MW for batteries in January 2024
- Current indicative triad dates provided battery energy storage systems with an uplift of £514/MW
So what happened in these services, and what does the revenue stack for batteries look like now?
Dynamic Regulation sees a steeper reduction in price
Frequency response clearing prices fell by 20% in January 2024, a similar reduction to that observed in December 2023. Dynamic Regulation, which averaged £4.36/MW/h, had the most significant decrease in price. Balancing Mechanism-registered units performed more often in the high service, which reduced in price from -£4.19/MW/h to -£5.87/MW/h.
Dynamic Regulation revenues turned increasingly negative
Frequency response revenues within the index fell by almost 50%, from £590/MW in December to £310/MW in January. This was driven by a reduction in revenues from Dynamic Regulation, where the service now costs participants £500/MW.
Wholesale trading now dominates the GB BESS Index
In recent months, the revenue stack for battery energy storage has changed. The proportion of response revenues within the stack has steadily declined. Meanwhile, wholesale trading and the Balancing Mechanism have increased. In December 2023 and January 2024, earnings from wholesale trading represented over 50% of the GB BESS Index.
Despite still representing over half of the revenue stack, wholesale trading revenues fell from £1.5k/MW in December to £1k/MW in January 2024.
This follows a fall in gas prices in recent months. The SAP gas prices averaged £95/MWh in November 2023, falling to £67/MWh in January 2024. There has also been a slow reduction in carbon prices, falling to £26/MWh in January 2024.
In addition, a cold snap in the middle of the month was accompanied by high wind generation, meaning prices didn’t spike in this period. The combination of falling commodity prices and low volatility means price spreads fell from £66/MWh in December to £48/MWh in January.
Batteries earned more from the Balancing Mechanism than frequency response in January 2024
For the second month in a row, the total battery volume dispatched through the Balancing Mechanism has increased. In December, 1 GWh of battery volumes was dispatched per day, and in January this rose to 1.1 GWh. This increased dispatched volume slightly outpaced the increase in availability, meaning the in-merit dispatch for batteries rate rose from 3.6% to 4.6%.
This increase contributed to battery revenues from the Balancing Mechanism increasing by 30% to £540/MW. This is £210/MW higher than the earnings generated from frequency response services. This means that, for the first time, batteries within our index earned more revenue from the Balancing Mechanism than frequency response.
The volume increase comes as bulk dispatch was relaunched in the Balancing Mechanism on Monday, 8th January 2024. In January, batteries saw twice as many acceptances compared to December. However, the volume per dispatch halved. Overall, it will take time to see how far bulk dispatch will impact skip rates and revenue.
The Capacity Market and Triads are playing an increasingly significant role in battery revenues
In addition to the Balancing Mechanism overtaking frequency response in revenues, other revenue streams have also increased in significance within the stack.
94% of battery capacity in Great Britain is contracted in the Capacity Market. Contracts here can generate revenues of over £2k/MW/month. In January 2024, batteries earned an average £1.3k/MW from the Capacity Market, which provided an uplift of 70% from the GB BESS Index.
In addition to the Capacity Market, January is a Triad month. Based on the current indicative Triad dates, batteries earned an additional £514/month on average. However, this is split by geography; systems in the north of England and Scotland do not receive any benefit from export Triads.
With falling revenues from frequency response, the revenue stack for batteries will likely continue to evolve. This is especially the case as new revenue streams come online in 2024.