When record-low temperatures descended on Texas in January, battery energy storage systems played a key role in ensuring the ERCOT grid was able to navigate the storm.
The extreme weather conditions were preceded by extreme forecasts. ERCOT’s day-ahead load forecast indicated that system demand would rise as high as 89 GW between 7 and 8 AM on January 16th.
This would have been the record demand in ERCOT by nearly 3.5 GW. Naturally, this resulted in projections for very low available capacity.
Ultimately, actual demand was significantly lower than what was forecasted. So, how did this impact overall battery energy storage revenues? And how did it affect which markets those revenues came from?
Revenues during Storm Heather were significant
Across the two coldest days of Winter Storm Heather, battery energy storage systems in ERCOT earned an average of more than $6,000/MW for providing crucial flexibility to the grid.
Despite the fact that system demand was significantly lower than the forecast, there were still high prices during the winter storm. In fact, January 15th and 16th of 2024 both would have ranked in the top 21 highest revenue days of 2023.
Revenues looked a little different in comparison to 2023
Battery energy storage systems earned less than 7% of their revenues via Energy Arbitrage during Winter Storm Heather.
This was in contrast to 2023 as a whole. Last year, the proportion of revenues earned from Energy Arbitrage more than doubled from 7% in 2022 to 15%.
Why was Energy Arbitrage a less significant portion of the revenue stack?
Peak demand in real-time was far below the day-ahead forecast on the 15th and 16th. Forecast errors were 11% and 14% for the peak demand hour of each day, respectively.
This over-forecast meant that clearing prices for Ancillary Services were - on average - four times higher than real-time settlement prices for Energy during the morning peaks.
ERCOT’s load forecasts tend to be very conservative, particularly in extreme cold weather scenarios.
Most batteries tend to avoid day-ahead Energy contracts to preserve flexibility. As a result, their primary exposure to high day-ahead prices was through Ancillary Service contracts.
However, there was a significant spike in real-time prices during the evening of the 16th. This was largely due to a significant net load ramp, with demand beginning to ramp up while the sun set. This meant preserving some flexibility for Energy Arbitrage in real-time paid off for some batteries.
Benchmarking Pro ERCOT subscribers can take a look at how individual battery energy storage systems navigated Winter Storm Heather below.
How did significant day-ahead to real-time spreads impact the battery energy storage revenue leaderboard?
Day-ahead prices were around four times higher than real-time prices during each morning peak. As a result, batteries that targeted the Day-Ahead Market for securing revenues performed at a high level.