In December, battery energy storage revenues in Great Britain reached their highest level since January 2023. Revenues increased from November by 65% to £84k/MW/year, the highest monthly increase in four years. The high revenues were primarily caused by high wholesale prices and record levels of Balancing Mechanism dispatches.
Battery revenues in December doubled from January 2024
In early 2024, battery energy storage revenues reached their all-time low, averaging £36k/MW/year. In the final month of 2024, revenues reached their highest level in two years, more than doubling from January.
Revenues increased in every income stream except imbalance. The most significant increase came from frequency response, where revenues more than doubled due to a 94% increase in frequency response clearing prices.
The new Quick Reserve service went live on December 3rd. As a result, total reserve revenues increased to their highest-ever level, five times higher than their previous record set in March 2024 when Balancing Reserve launched.
Balancing Mechanism revenues also reached an all-time high, as a record 141 GWh of battery energy storage was dispatched across December.
The high revenues across all markets were largely driven by increased wholesale price spreads, which were up 32% in December. This came as wholesale prices hit their highest levels in two years.
Various factors, including wind generation, gas and carbon prices, and in-merit dispatch rates drive battery revenues. December saw an increase across most of these macro factors, including a 71% increase in dispatched Balancing Mechanism Offers.
Day-ahead wholesale price spreads increase by 32%, increasing revenues
Wholesale price spreads are still the main driver of battery revenues. In December, spreads increased to £96/MWh on average, their highest level since January 2023. On December 11th and 12th, price spreads reached back-to-back highs of £260/MWh and £409/MWh, respectively, increasing the monthly average. This contributed to the £4k/MW/year increase in wholesale revenues.
Wholesale prices spiked in December, followed by more negative prices
On December 11th and 12th, wholesale prices reached their highest levels in exactly two years. This was due to high national demand and low wind generation, meaning peaking plants were switched on. These plants are expensive to run, and with gas prices rising in December, running costs were at their highest levels in 2024. These price spikes meant batteries earned their highest single-day revenues in two years.
On December 11th and 12th, national demand averaged 34 GW. In the week before Christmas, this fell to 28 GW, reducing wholesale prices. During off-peak periods, prices fell to £0/MWh more often than in November, contributing to the higher price spreads.
Power prices were negative for 176 hours in 2024
The low demand before Christmas meant power prices fell negative for three hours in December. This brings the total number of negatively priced hours to 176 in 2024 - 65% more than in 2023.
In December 2023, prices fell negative for 30 hours in the final ten days of the year. This December only featured five negatively priced hours in the same period. This was due to 12% more demand, while both years averaged 11 GW of wind generation over the Christmas period.
National demand was higher in 2024 than in 2023
Demand has reduced every year since 2016—except for 2020-21 due to COVID—which has been the main contributor to increased negatively priced hours. However, in 2024, despite the increased number of negatively priced hours, national demand was marginally higher than in 2023.
In 2023, demand fell below 20 GW in 18% of all settlement periods, compared to 15% in 2024. So what caused the rise in negatively priced hours in 2024?
As national demand has stabilized this year, wind generation has continued to increase. In 2024, wind generation averaged 7.4 GW - 4% more than in 2023. Wind generation exceeded 7 GW in half of all settlement periods.
Quick Reserve launched, causing Reserve revenues to increase
The second new reserve service - Quick Reserve - went live on December 3rd. The new service is highly suited to batteries, the only technology to provide the service so far. As a result, clearing prices in Quick Reserve have been higher than in Balancing Reserve.
The addition of this service means total battery reserve volume has increased from 160 MW to 580 MW on average. This, combined with high clearing prices due to high wholesale spreads, meant Reserve revenues increased from £1k/MW/year to £11k/MW/year in December.
Frequency response clearing prices increased by 94%, leading to high revenues
The high wholesale spreads meant battery optimizers adjusted their bid prices in frequency response services. This resulted in some of the highest clearing prices seen in 2024, particularly in Dynamic Containment Low, where prices spiked to £70/MW/h on December 12th. This is the largest frequency response service, with 1.5 GW procured on average each day in December. As a result, high clearing prices in this service have the largest impact on battery revenues.
Dynamic Containment High and Dynamic Regulation High prices also increased sharply in December. As a result, frequency response prices reached their highest monthly average since October 2023. Total battery revenues from frequency response increased to £20k/MW/year.
Batteries earned their highest-ever Balancing Mechanism revenues
Batteries earned £20k/MW/year from the Balancing Mechanism in December 2024 - a 71% increase from November. This was because batteries were dispatched for a record 141 GWh of Balancing Mechanism volume. This volume was biased towards Offers, with 60% of Balancing Mechanism dispatches coming from Offers. This meant batteries used the Balancing Mechanism to sell energy more than to buy energy - resulting in increased revenues.
The in-merit dispatch rate increased for the third month in a row, climbing to a record high of 15%. This was largely driven by high in-merit Offer dispatch rates, which were over 30% on five different days in December.
Batteries offered cheaper Balancing Mechanism volume than CCGTs
Batteries were dispatched for record Offer volume because they were often priced more competitively than CCGTs. On average, battery Offers were £117/MWh in December, while CCGT Offers were £144/MWh. This means batteries were 20% cheaper than CCGTs, compared to 9% cheaper in November.
On December 12th, four CCGTs were dispatched for 370MWh at 2.30 p.m. for an average price of £2000/MWh. During this settlement period, 500MWh of batteries were available at a cheaper price but were not dispatched.
