Pricing
24 Feb 2023
Shaniyaa Holness-Mckenzie

Battery energy storage Week in Review: 17th - 23rd February

A roundup of all you need to know from the markets most relevant to battery energy storage this week.

Matt brings you the Week in Review, and he’s on location this week!

⚡ Low demand and high wind generation meant price spreads of up to £113 /MWh and better day-ahead trading values this week.

⬆️ It was a respectable week for Dynamic Regulation, with price increases in both the High and the Low services.

🚀 The results are in! T-4 Capacity Market for 2026/27 cleared at £63 /kW/year in Round 3 of Tuesday’s auction.

Key metrics

  • Average day-ahead price: £124 /MWh, -11%
  • Average day-ahead spread: £76 /MWh, +19%
  • Maximum day-ahead price: £166 /MWh, -11%
  • Minimum day-ahead price: £53 /MWh, -46%

It was a tale of two generation patterns this week, with high wind generation in a blustery first half of the week (up to Tuesday morning). From there, CCGTs generated the bulk of GB’s power. This meant prices were fairly low across the week, with a maximum price of just £166 /MWh. Prices also dropped to £53/MWh on three occasions due to the high wind and low demand in the early mornings.

This meant that the biggest spread was £113 /MWh created as shown in Figure 1 - a significant jump compared to last week’s biggest spread (£69 /MWh).

Figure 1: Hourly prices and daily price spreads from N2EX day-ahead price data.

Frequency Response

Key metrics:

  • Average Dynamic Containment Low price: £2.92 /MW/hr, -13%
  • Average Dynamic Containment bid volume: 1,116 MW, +3%
  • Average Dynamic Containment accepted volume: 691 MW, -4%

Last week, three higher prices on a single day bolstered Dynamic Containment Low’s average price. It was a different scenario this week: prices were above £5 /MW/hr more consistently during EFA block 5. However, with a maximum price of only £13 /MW/hr, the average price dropped to £2.92 /MW/hr.

Figure 2: Generation surplus forecast for next week. Data from National Grid ESO 2 to 14-day Surplus Forecast.

Unlike most of the Dynamic suite, Dynamic Moderation Low is often unsaturated. For example, this week’s bid volume was just 53 MW compared to the service’s volume requirement of 100 MW. Dynamic Moderation High is usually more popular - this week, there was a bid volume of 129 MW.

The Dynamic Regulation High prices were non-zero in six of the 42 EFA blocks of the week. This week's maximum price was only £10 /MW/hr, but the average price rose to £1.04 /MW/hr.

The reduction in bid volumes in both the High and Low Dynamic Regulation services will have, in part, pushed up that price. The new 200 MW requirement comes in for Dynamic Regulation on 1st March, so we might see higher prices next week, especially if bid volumes do not increase significantly.

Figure 3: Bid volumes for each Dynamic frequency service. The total volumes accepted across the three markets are overlayed.

Battery market benchmark revenues

Key metrics:

  • Dynamic Containment benchmark: £35k /MW/yr (-3%)
  • 1-hour day-ahead trading benchmark: £29k /MW/yr (+22%)
  • 2-hour day-ahead trading benchmark: £53k /MW/yr (+19%)

The day-ahead trading benchmark achieved an increase from last week as a result of the higher spreads available. In contrast, Dynamic Containment revenue fell slightly.

Firm Frequency Response and Dynamic Regulation maintained their first and second positions in our revenue benchmark leaderboard, respectively. Day-ahead trading with two cycles provided a more lucrative revenue stream for 2-hour batteries following a 19% increase in potential revenues. However, Dynamic Containment and Dynamic Moderation stayed the higher earners for 1-hour battery systems.

Figure 4: Potential revenues for each main revenue stream, estimated from available prices. Trading value is calculated using Modo’s algorithmic dispatch model on EPEX day-ahead prices. Arrows represent movement on the board and may not reflect changes in price.

Firm Frequency Response maintained a strong lead over the other revenue streams. However, the revenue benchmark for this service will decrease next week as we move into March (March’s Firm Frequency response price is £9.69 / MW/hr compared to £15.73 /MW/hr for February). We’ll see how far this impacts next week’s market benchmark revenue leaderboard!

Next week

Key metrics:

  • Maximum National Grid ESO Demand Forecast: 41 GW, Thursday 2nd March
  • Minimum National Grid ESO Surplus Forecast: 2.0 GW, Monday 27th February

A high surplus is expected on Saturday, but demand is set to pick up next week, and there will likely be less wind generation. Altogether this means we have a drop in surplus next week, but it is still healthy overall. National Grid ESO has stated that a surplus of greater than 1 GW is adequate - we will have to wait to see whether an adequate surplus can be maintained throughout the week.

Figure 5: Generation surplus forecast for next week. Data from National Grid ESO 2 to 14-day Surplus Forecast.

Chart of the week

The T-4 Capacity Market auction for delivery year 2026/27 started and finished on Tuesday 21st February. It closed in Round 3, with the clearing price a whopping £63 /kW/year - even higher than the T-1 auction clearing price! To learn more about the T-4 auction results, check out our recent article.

As if that wasn’t exciting enough, of the 43 GW accepted, 5 GW is for new build battery energy storage! To put that into perspective, our chart of the week, Figure 6, shows just how significant this is.

Figure 6: Connection capacity of various sites and fuel types currently available or under construction in GB

By October 2026, we could expect a 5 GW increase in battery energy storage capacity from the results of this auction alone. That’s over two times as much battery storage capacity as is connected to the grid right now. The 5 GW even includes eight sites with a capacity of 200 MW or more!

5 GW is also greater than the capacity of Hinckley Point C, the first new nuclear plant being built in the UK in over 20 years. Last year, 3.3 GW of new build battery energy storage won contracts in the T-4. This growth in awarded capacity indicates battery energy storage is becoming a significant player in the GB generation stack.