Battery energy storage Week in Review: 3rd - 9th February

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

Here’s Matt with all the biggest news for GB battery energy storage this week.

The headlines this week are:

📉 Day-ahead price spreads fall despite a slight increase in average prices.

💥 Dynamic Regulation jumps to the top of our market benchmarks for two-hour systems following a rise in Dynamic Regulation High prices.

👋 Goodbye to the Department for Business, Energy & Industrial Strategy. Hello to the Department for Energy Security and Net Zero. This week, the government disbanded BEIS in a departmental reshuffle - the new acronym is still to be confirmed!

Key metrics

Average day-ahead price: £147/MWh, +9%
Average day-ahead spread: £74/MWh, -16%
Maximum day-ahead price: £230/MWh, +19%
Minimum day-ahead price: £75/MWh, +52%

Prices this week look very similar to what we saw two weeks ago. There were low spreads as the minimum price stays above £100/MWh following a sharp rise on Friday. Prices were highest on Monday and Tuesday, when wind generation plummeted.

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

Frequency Response

Key metrics:

Average Dynamic Containment Low price: £5.61/MW/hr, +21%
Average Dynamic Containment bid volume: 989 MW, +4%
Average Dynamic Containment accepted volume: 659 MW, +2%

One very high price (£61.36) on Tuesday drags up the average price for Dynamic Containment Low this week, in an otherwise low-price week for the response service. This higher price came as volume exited the market in anticipation of a possible Triad, which is unlikely to have materialized.

Figure 2 shows that it was a reasonably positive week for all the frequency response services as prices increased for all but Dynamic Regulation Low. Dynamic Regulation High saw the biggest price increase, jumping significantly from last week’s low of just 55p.

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

This increase in Dynamic Regulation High price comes from a handful of higher clearing prices, mostly occurring on Monday and Tuesday. Big drops in volumes within EFA block 5 on these days drove the highest prices for the week of £30/MW/hr. The reduced volume most likely comes due to Triad avoidance by optimizers.

However overall bid volumes for the service remain high (no pun intended), and this will likely continue due to the doubling of volume requirement next month. If you missed that update, you can catch up on it in last week’s week in review article.

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: £70k/MW/yr (+29%)
1-hour day-ahead trading benchmark: £28k/MW/yr (-4%)
2-hour day-ahead trading benchmark: £51k/MW/yr (-5%)

The big increase in Dynamic Regulation High prices means Dynamic Regulation has jumped up the leaderboard for 2-hour battery energy storage systems, with a 20% growth in value from last week. Revenue also increased for Dynamic Containment and Dynamic Moderation, while day-ahead trading stayed stagnant with low price spreads once again.

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.

Next week

Key metrics:

Maximum National Grid ESO Demand Forecast: 42 GW Monday 13th February
Minimum National Grid ESO Surplus Forecast: 2.5 GW Monday 13th February

Wind generation looks set to pick up over the week and demand should reduce with milder temperatures forecast. Surplus looks likely to be more than good enough, but recent weeks have shown that the unpredictability in wind forecasts can lead to big changes in this throughout the week.

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

Other News

On Tuesday, the government had a reshuffle and established a new department focused on energy security and net zero.

The new department, the Department for Energy Security and Net Zero, will be responsible for implementing REMA and other major policy reforms required for the net-zero transition. It's expected that there won’t be much change in the short-term, with the same teams likely to continue working on these policy reforms.

The creation of this new department means the end of BEIS, previously responsible for energy. It hasn’t been confirmed what the acronym is going to be or how we’ll pronounce it - our two best guesses are DESNZ (“dez-nez”) or DESN0 (“dez-no”), but all suggestions - serious or otherwise- are very welcome!

Chart of the week

If there’s one thing we talk about a lot at Modo (besides battery energy storage), it’s wind! Usually, we focus on the impact on revenues, but what about the impact on the carbon intensity of the grid?

Winter this year is shaping up to be the greenest ever, with an average carbon intensity so far of just 159 gCO2/kWh. This is a 7% drop from last year.

Our chart of the week shows just how much carbon intensity during winter months has fallen over the last 10 years.

Figure 6: Chart of the average carbon intensity from the GB generation mix from winter 2012/13 to winter 2022/23. Winter months have been determined as November - February inclusive.

Of course, there is still most of this month left, but if things continue as they are, winter 2022-2023 will be the lowest carbon winter on record!