As the revenue opportunities for battery energy storage systems (BESS) change and expand, the question of how to best optimise a site for maximum revenues becomes more important. This job often falls to a third-party organisation that operates BESS on behalf of owners. In return, they take a percentage of the earnings.
This article is the first in a two-part series, intended to guide you through the process of monetising battery energy storage assets. In the next article, we’ll dive into some of the details around market access, site operation and contractual operations. But, in Part One, we’re going to focus on the following questions:
- What is an optimiser?
- Do you need an optimiser?
- How do you choose an optimiser (and what are the challenges)?
What is an optimiser?
Route-to-market provider, aggregator, operator, optimiser, trading partner. Whilst there are many names for these types of organisations, they all provide the same services:
- Accessing markets - Enabling a site to participate in the various revenue streams for BESS.
- Operating the site - Designing and implementing a strategy to maximise revenues. This should include market selection, trading, dispatch, and degradation management.
- Financial reporting - Communicating performance and earnings of the site.
For the sake of simplicity, we’ll stick to using the term optimiser.
Do you need an optimiser?
There are several ways for BESS to enter the market, and different solutions work best for different types of sites and organisations. Here, we take a look at the options available and suggest which organisations they’re most suited to (see table 1 below).
Table 1 - Optimisation solutions for monetising an asset - which solution is right for your organisation?
Let’s look at the existing landscape for optimisation. Figure 1 (below) shows the total installed GB BESS capacity, split by choice of optimisation solution:
Figure 2 - Optimisation solutions for the GB BESS fleet.
- 69% of sites in GB are optimised by third parties, making it the most popular route-to-market solution for BESS owners.
- For existing EFR sites, owners will likely need third-party optimisers as and when their EFR contracts expire.
How to choose an optimisation partner (and why it’s challenging)
If you decide to outsource the operation of your asset, there’s a multitude of third-party optimisers to choose from. All of them offer subtly different solutions build on their specific technology stack. Choosing between them is not straightforward, and there are a number of factors that need to be considered (we’ll get to those later). To make things more complicated, the language of optimisation can often be confusing, full of buzzwords and jargon.
So, how do you choose an optimiser? Let’s take a look at how the largest owner of battery energy storage in GB, has tackled this problem.
Case study - Gresham House
Gresham House owns 409 MW of BESS across 16 sites (32% of the GB BESS fleet). Figure 2 (below) shows how Gresham House allocates its portfolio across third-party optimisers:
Figure 2 - Gresham House BESS portfolio, split by optimisation solution.
- The size of Gresham House’s portfolio has allowed them to distribute sites across multiple optimisers. These include Habitat Energy, Arenko, EDF and Flexitricity.
- This diversification reduces the risk of being tied into an agreement with a single, potentially underperforming optimiser.
- Gresham House’s approach affords them a unique perspective on the optimiser market, with a hands-on understanding of the costs and benefits of each optimiser.
- 130 MW (32%) of Gresham House’s portfolio is tied up in EFR contracts. Third-party optimisers will likely manage these assets when their EFR contracts expire.
The tender process
While distributing a portfolio across several optimisers isn’t a viable option for most BESS owners, the example of Gresham House raises an important point: understanding each optimisers’ offering is vital when choosing a partner. As such, the most important part of selecting an optimiser is the tendering process.
In order to get the most out of the tendering process (and to make the best decision), there are some important questions you need to consider. In Part Two, we’ll dive into these in more detail and cover the following topics:
- Accessing markets.
- Operating your site.
- Contractual arrangements.
Click here to read Part Two.