In May, average battery revenues in Great Britain dropped 33% to £39k/MW/year, following two consecutive months of growth. However, one system implemented new strategies to earn over £70k/MW/year.
In April we updated our index to include Capacity Market revenues to provide a complete picture of total battery revenues.
So, what drove the 33% reduction in revenues in May?
Revenues fell across all income streams, but frequency response was hit the hardest
In May, revenues fell in every market batteries operate in. The largest reduction occurred in frequency response, with total revenues from frequency response services decreasing from £16k/MW/year to £5k/MW/year.
Wholesale market revenues fell 23% to £13k/MW/year, while reduced Balancing Mechanism activity resulted in a 12% revenue decline.
High dynamic frequency response prices near record lows
Falling clearing prices in the three high-frequency response services drove most of the 65% reduction in frequency response revenue.
Dynamic Containment High, the largest frequency response service, saw a 45% reduction in clearing prices in May. This, alongside a 10% fall in Dynamic Containment Low prices, resulted in a £6k/MW/year reduction in revenue from the service.
Meanwhile, Dynamic Moderation and Regulation High prices dropped to -£0.21/MW/h and-£5.75/MW/h, respectively, their second-lowest monthly average ever.
Falling frequency response prices driven by wholesale prices
Now that frequency response services have reached full saturation, clearing prices of these services are mostly driven by the revenue batteries can earn elsewhere - primarily in the wholesale market.
In April, increased spreads caused Dynamic Containment prices to rise. On top of this, the frequent negative prices boosted the value of all high-frequency response services.
May saw a reversal of these conditions. Average wholesale spreads fell by 23% to £44/MWh, despite wholesale prices increasing by 36%h.
On the three days with lower power prices and increased spreads, battery revenues earned 46% more than the monthly average.
As a result, frequency response prices decreased, as batteries saw lower trading value. This was particularly pronounced when comparing the Dynamic Regulation High price to the wholesale price.
Balancing Mechanism dispatch rates decrease for the first time since November
Despite the launch of fast dispatch in the Open Balancing Platform, in-merit dispatch rates for batteries fell from 11.0% to 9.6%. This reduced the total accepted volume of both Bids and Offers for the first time since November.
The proportion of Offers remained consistent at 54%. Therefore, the fall in volume led to a 12% decrease in Balancing Mechanism revenue.
Batteries receive a 50% higher dispatch rate for Offers than Bids
The dispatch rate for Offers across Great Britain averaged 12% in May, compared to 8% for Bids - however, this varied regionally. Batteries in the South of Scotland received the best dispatch rate for Offers at 16% while receiving the second-highest dispatch rate for Bids.
North Scotland has the highest dispatch rate for Bids and is the only region where this exceeds the dispatch rate for Offers. This is due to the high volume of system-flagged actions north of the B4 constraint boundary.
High Balancing Mechanism Offer availability led to improved revenues
Despite decreased Balancing Mechanism revenues, batteries prioritizing Balancing Mechanism availability earned more revenue. Little Raith was the highest earner in May whilst providing the highest proportion of its potential dispatch capability for Offers. 13% of its maximum potential Offer volume was provided in-merit, over four times more than the average of 3%.
This was driven by Little Raith’s Positive Balancing Reserve contracts, which incentivized high Balancing Mechanism availability. This helped Little Raith earn £52k/MW/year, excluding Capacity Market revenue, 85% more than the average.
Balancing Reserve strategies achieved higher revenues than Dynamic Regulation High and Wholesale
Dynamic Regulation High and wholesale trading, a popular strategy for two-hour systems, saw reduced value in May. In April, Dynamic Regulation High contracts provided an uplift of £16/MW per EFA block versus buying this energy on the wholesale market. In May, this fell to £7/MW. This meant batteries following this strategy saw reduced spreads between the cost of importing energy and revenue from exporting it.
This, combined with reduced wholesale price spreads, meant batteries following a Dynamic Regulation strategy earned 33% less revenue than in previous months. As a result, Little Raith topped the Modo Energy leaderboard, earning 25% more than the second-highest earner.
