​Merchant revenues for CAISO’s grid-scale battery energy storage systems (BESS) increased 7.3% month-over-month, coming in at $2.5/kW for the month of August 2025. Year-on-year, total revenues from Energy arbitrage and Ancillary Services fell 39.5%, from a base of $4.14/kW in August 2024.

The annual decline is primarily due to a tightening of day-ahead Energy price spreads. Average Day-Ahead Top-Bottom 4-hour price spreads decreased by 40.4%, marginally more than market revenues. This means batteries captured a greater proportion of the price spread available to them, as spreads decreased more than revenues.

​Both ends of the day-ahead Energy arbitrage trade tightened: mean daily highs fell 34.5% and average daily lows rose 29.6%.

Executive Summary

• Battery revenues ticked up month-over-month in August, even as year-on-year earnings fell sharply due to weaker day-ahead price spreads.
• Midday price dynamics shifted as natural gas plants and BESS charging lifted trough prices, reshaping effective load profiles across the system.
• Zonal differences continued to define arbitrage opportunities, with ZP26 consistently offering stronger spreads than others.

Please reach out to logan@modoenergy.com if you have any questions about CAISO benchmarking or research.

Market revenues moved down uniformly, regardless of source

Arbitrage revenues from the Integrated Forward Market (IFM) — CAISO’s terminology for their day-ahead exchange — continue to make up more than 70% of BESS market revenues. With opportunity for arbitrage in that market down 40.4% as measured by the TB4 spread, its contribution to revenues shrank by $1.3/kW year-on-year.

Ancillary Service revenues took their cue from the IFM, lowering their contribution to merchant revenues by $0.3/kW in aggregate.

​Net changes to Real-Time contributions round down to zero: Fifteen Minute Market (FMM) revenues fell $0.60/kW while Real-Time Dispatch (RTD) revenues grew $0.58/kW.

Although real-time settlement is allocated to these two distinct buckets, resources bid into a single real-time market. CAISO constructs a FMM schedule for the assets under its purview, and then sends RTD instructions for minor deviations from that schedule.

This nested market structure is the reason for the offsetting red and green bars in the second chart above. CAISO systematically over-committed BESS in FMM schedules, then dispatched them via RTD to buy back positions when load fell short of forecast.

That phenomenon was much less pronounced in August 2025. BESS operators are likely “shading” their real-time bids more often now: under-committing themselves in FMM offers in anticipation of RTD dispatch at potentially higher prices.

IFM Energy is the source of most BESS revenues, however, and their prices were exceedingly calm this past month.

Price spreads averaged just $110/MW in August 2025

Modo Energy’s TB4 Index did not reach $200/MW once, and CAISO-wide IFM prices never broke $115/MWh. This is in stark contrast to a year prior, when spreads remained above $300/MW for six consecutive days.

​High peak prices drove last year’s extreme spreads, concentrated in the month’s first six days. Forecasts projected daily highs rivaling July 2024, pushing load forecasts upward.

August 2025 had no similarly priced days, leading to flatter daily profiles — the average maximum price was $62/MWh and the average minimum was $29.1/MWh.

​Elevated natural gas prices supported those higher Energy price troughs. CAISO’s fuel price index bounced between $2.48/mmBTU and $3.06/mmBTU last month; uniformly higher than last year’s path. Although typically treated as “peakers”, CAISO’s natural gas plants run through midday to ensure they are online for the steep evening net load ramp.

But it’s not just natural gas keeping midday prices higher — utility-scale batteries are as well.

Batteries regularly add 40GWh of midday load

On a typical August day, BESS imported 7GW every market interval in the hour ending 11am. During the entire time CAISO’s batteries are net importers in the middle of the day, they typically add 40GWh of electricity demand.

​Another way of framing this is by using effective load — net load plus BESS charging. While the average minimum net load fell 2.7GW, the minimum effective load fell just 300MW. This metric makes clear that energy demanded from non-renewable sources has hardly shifted.

Without a continued buildout of solar, which provides large amounts of zero or subzero offers for energy, batteries will continue to lift midday prices.

However, hybrid and co-located BESS resources will be much more resilient to this trend. A hybrid solar-plus-storage resource can charge its battery directly from on-site solar output at effectively zero marginal cost. That shields it from higher midday wholesale prices that standalone BESS must pay when charging from the grid. And to a lesser extent, co-located BESS will benefit from the depressed local prices caused by their paired solar site.

ZP26’s BESS continue to see the highest arbitrage opportunities

In another continuation of its long-run trends, the state’s central ZP26 zone saw better arbitrage opportunities than the solar-saturated south or more sparsely populated north.

To underscore this point, only one battery in SP15 saw a TB4 spread higher than ZP26’s median $4,481/MW in August 2025. That resource, Eastern BESS 1, saw the second-highest TB4 opportunity among all BESS in CAISO, registering $8,137/MW.