Average battery energy storage revenues in Great Britain rose 25% in June to £49kMW/year as negative power prices returned. Higher wind generation and gas and carbon prices led to increased wholesale power price spreads, while frequency response prices in every service increased.
In this article, we’ll explore the factors that drove these changes in June.
- Frequency response saw the largest increase in revenues, rising by £8k/MW/year.
- Batteries earned £4k/MW/year more from wholesale markets in June as spreads increased 34%.
- Balancing Mechanism revenue remained at £8k/MW/year despite an increase in dispatch rate, due to a shift in volume toward Bids.
- Balancing Reserve revenue remained at £1.2k/MW/year with only 400 MW of the service still being procured.
Record Balancing Mechanism Bid volume dispatched in June
The in-merit dispatch rate for batteries increased to 10.1%, mostly due to an increase in Bid dispatch volume (where batteries pay for energy). Total Bid availability priced in-merit in June remained at 12.5 GWh per day but dispatched Bid volume for batteries increased by 25% to a record 1.2 GWh per day on average. This meant the in-merit dispatch rate for Bids increased to 10% from 8% in May.
Despite the rise in dispatch rates Balancing Mechanism revenues remained at £8k/MW/year. This is because Offer dispatch volume (where batteries are paid for energy) increased by just 4%.
A rise in wholesale price spreads drives increased wholesale revenues
Spreads in the N2EX day-ahead market exceeded £100/MWh on two days in June, the first time this has happened in 2024.
A return of negative prices, alongside a 10% increase in daily maximum prices resulted in wholesale spreads increasing by 34% from May to £59/MWh on average. This is the highest monthly average price spread so far in 2024.
This helped battery revenues from wholesale increase by 34% to £17k/MW/year, their highest since October 2023.
Modo Energy subscribers can read the full article to find out:
- How wind generation impacted wholesale spreads
- The effect of gas and carbon prices on wholesale power prices
- How frequency response revenues change with wholesale spreads
Increased wind generation resulted in a return of negative power prices
Wind generation increased by 20% in June, and daily average wind generation exceeded 10GW on ten different days, compared to four in May. Wind generation during demand lows in the early afternoon increased from 3.9 GW to 5.5 GW.
This led to negative power prices returning for 18 hours in June, after zero negative periods in May. This means Great Britain has now seen 83 hours of negative pricing in the first half of 2024, just 23 hours fewer than the current annual record set in 2023.
Increased Gas and Carbon prices resulted in higher peak prices
Gas and carbon prices increased by 10% and 16%, respectively, on average from May. These prices impact the minimum wholesale price spreads we would expect to see on any given day due to how they drive the running costs of CCGTs.
The difference in running costs of different CCGTs at different efficiencies results in a ‘base spread’ - the minimum price spread expected a given combination of gas and carbon price. The increase in commodity prices has resulted in a 12% increase in base expected spreads from CCGTs compared to May, and 16% more than April.
Meanwhile, the higher commodity prices also increased peak prices, resulting in higher spreads on days with negative prices than in April.
Frequency response revenues rise £8k/MW/year in June
Clearing prices in every frequency response service increased in June. This resulted in frequency response revenues increasing from £6k/MW/Year to £14k/MW/year.
The largest proportional increases were found in Dynamic Regulation High (+38%) and Dynamic Containment High (+60%). Dynamic Moderation High prices increased from -£0.21 to £0.97/MW/hour, helped by a 40 MW increase in requirement volume in June. The combination of these services are performed by over 50% of battery volume within the GB BESS Index, therefore changes in their prices have a large impact on revenues.
Increased frequency response revenues and prices were driven by higher wholesale spreads
When wholesale spreads increase, the revenue opportunity in wholesale markets for batteries rises. This results in operators bidding a higher price in other markets which would prevent them from entering wholesale markets.
This is apparent when looking at frequency response bid pricing. For example, in Dynamic Regulation High, the proportion of bid volume priced above -£5/MW/h rose to nearly 100% in April and June when wholesale spreads increased. On days with lower spreads, between 60% and 70% of bid volume was priced below -£5/MW/h.
Similar trends occurred in Dynamic Moderation and Containment, resulting in increased frequency response prices during periods of higher wholesale spreads.
Batteries mix trading, Balancing Mechanism, and Dynamic Regulation in June
In June, batteries primarily made use of three different income streams to earn revenue. 50% of systems purchased most of their energy through the Balancing Mechanism and frequency response services. Meanwhile, the other 50% purchased wholesale energy at cheaper prices in June, due to the high winds.
Both options for importing energy resulted in revenues upwards of £60k/MW/year for some of the highest-earning 2-hour systems.
9 out of the 10 highest-earning batteries in June were two-hour systems. The other system was Arbroath, now 1.4 hours in duration. It followed a Dynamic Regulation High strategy that has been popular with two-hour batteries.
While most of the top earners also followed a Dynamic Regulation High strategy, Chapel Farm and Jamesfield diverged from this. Jamesfield 2 imported 78% of its energy via Bids in the Balancing Mechanism and sold it during peak periods on the wholesale market. This strategy can be particularly effective for batteries in the North of Scotland due to their high Bid dispatch rates.
Chapel Farm was the only net importer of energy on the wholesale market in June out of the top 10. This allowed it to receive more Offers in the Balancing Mechanism than other systems. Chapel Farm received an in-merit dispatch rate of 17%, higher than all other batteries.