A roundup of all you need to know from the markets most relevant to battery energy storage this week.
You can find the TL;DR version of our Week in Review for battery energy storage here.
The headlines this week are:
⚖️ Low demand, steady wind generation, and help from interconnectors means low spread in power prices
💥 Firm Frequency Response is back on top as prices fall across all the Dynamic Frequency Response services
📈 The results are in! T-1 Capacity Market for 2023/24 clears at £60 /kW/year in Round 3 of Tuesday’s auction
Key metrics
- Average day-ahead price: £140 /MWh, -5%
- Average day-ahead spread: £63 /MWh, -16%
- Maximum day-ahead price: £186 /MWh, -19%
- Minimum day-ahead price: £102 /MWh, +37%
With milder temperatures, demand was low across the week, with the peak not quite reaching 40 GW. Furthermore, wind generation was consistent across the week and during the period of lower wind generation on the weekend, interconnectors made up the difference.
Altogether this meant there were no big swings in price as they stayed firmly between £100 /MWh to £200 /MWh, as shown in Figure 1. Overall, the greatest spread across the week was just £69 /MWh.
Frequency Response
Key metrics:
- Average Dynamic Containment Low price: £3.36 /MW/hr, -40%
- Average Dynamic Containment bid volume: 1079 MW, +9%
- Average Dynamic Containment accepted volume: 719 MW, +9%
Dynamic Containment Low saw some of the lowest prices across the week in the Dynamic frequency response suite. Tuesday 14th February was the highest earning day for the service with three higher prices, the maximum being £19.80 /MW/hr. On all other days, prices remained below £5 /MW/hr.
Figure 2 shows that Dynamic Containment Low wasn’t the only service to see a drop in prices this week, in fact, all services had a price reduction.
The biggest hit was seen by Dynamic Regulation High, which after propelling from £0.55 /MW/hr to £4.64 /MW/hr last week, saw an 85% reduction back to £0.71 /MW/hr. The service only had one non-zero price for the whole week, £30 /MW/hr for EFA block 5 on Monday 13th February.
Similar to last week, this price coincided with a big drop in bid volumes during that EFA block - as shown in Figure 3 below. Triad avoidance is likely to have caused the drop in bid volumes, as Monday’s expected peak did not materialise. Monday’s peak was 39 GW, much lower than the 42 GW predicted at the time last week’s article was written. Tuesday saw the highest peak this week at 39.3 GW.
Battery market benchmark revenues
Key metrics:
- Dynamic Containment benchmark: £36k /MW/yr (-49%)
- 1-hour day-ahead trading benchmark: £24k /MW/yr (-16%)
- 2-hour day-ahead trading benchmark: £16k /MW/yr (-24%)
Those drops in prices mean a fall in value for Dynamic Containment. This means that despite low price spreads across the week, day-ahead trading overtook it in value for 2-hour systems, as shown in Figure 4.
Firm Frequency Response (FFR) had by far the most value, especially for 1-hour systems. It was worth over three times in value than the next highest opportunities in Dynamic Moderation and Regulation. Dynamic Regulation retains good value for 2-hour batteries but does drop down below FFR for the week.
Next week
Key metrics:
- Maximum National Grid ESO Demand Forecast: 40 GW, Thursday 23rd February
- Minimum National Grid ESO Surplus Forecast: 5.4 GW, Saturday 18th February
Looking towards the coming week, the current surplus forecast looks very good. This is as wind generation is set to pick up over the week while demand remains low. As always, it will be interesting to see by how much and how quickly this changes as the week progresses.
Policy Updates
The T-1 Capacity Market auction for delivery year 2023/24 started and finished on Tuesday 14th February. It closed in Round 3, at a clearing price of £60 /kW/year. To find out more about the results in just five charts, check out our recent article.
Chart of the week
Dispatch volumes for battery energy storage in the Balancing Mechanism surged in January 2023, almost tripling from December. In fact, the volumes seen are the highest since the launch of Dynamic Containment in October 2020.
This will be welcome news to battery operators looking for value post-saturation of Dynamic Containment. However, in a wider context, the volumes dispatched are still low - just 0.27% of all Balancing Mechanism volume for the month. This shows that there is still a long way to go to boost opportunities for batteries in the market.