Give me the headlines
- UK Power Networks, the Distributed Network Operator (DNO) for London, the South-East and the East of England, is running a flexibility tender compatible with battery energy storage.
- Participants can bid for over 400MW in the Demand turn-up service and over 150MW in the Demand reduction service.
- The revenue from this could be stacked with current battery revenue streams, e.g. discharging into wholesale markets.
- However, assets must be in the right location and at the required voltage level.
- Assets must meet certain conditions and register for the service. This ‘pre-qualification’ period ends on the 30th January 2023.
- This could be the start of more DNOs procuring flexibility through these tenders.
A refresher on 2022
For battery energy storage, 2022 will be different from 2023. Great Britain’s battery storage fleet now has around 2GW of power capacity. This is enough to meet frequency response needs, so frequency markets are often oversubscribed (check out our review of battery energy storage in 2022).
What do the key markets look like for DNO flexibility tenders?
- The Demand turn-up service (flexibly taking more electricity from the network) procures more than 400MW across 24 sites.
- The Demand reduction service (flexibly taking less electricity from the network) procures over 150MW from more than 1,000 sites.
How much money is available for these services?
- The highest expected price for the Demand turn-up service is £850/MWh.
- The highest expected price for the Demand reduction service is £600/MWh.
- Depending on the sub-area (the location), the service is expected to be utilized between 15 and 40 hours per year.
- For a 1 hour system, revenue ranges from £2,600-32,800/MW/a.
- The expected volumes and price ranges for each sub-area can be seen below, or you can find full details from UK Power Networks here.
Why should battery owners and operators be interested?
If battery energy storage owners and operators have assets in the right locations, assets can be bid into either service, potentially improving revenues.
Demand turn-up looks particularly interesting as batteries can be paid to turn up demand soon before discharging on the wholesale market, stacking the Demand turn-up revenue on top of existing revenue. This is similar to the lucrative ‘Dynamic Regulation high and wholesale’ strategy we saw in 2022.
UK Power Networks also commented that, from the end of 2023, the dynamic product (a form of the demand turn-up service) is moving to day-ahead procurement. This means that it will be procured at a similar time to other ancillary services and wholesale trading strategies, encouraging this stacking strategy.
What should battery energy storage be doing now?
- Modo expects growth in distribution networks' flexibility markets, so battery owners and operators should keep these in mind.
- Contact your DNO to see if your asset(s) can participate.
- Think about these future revenue streams if you’re contracting an operator.
- For UK Power Networks’ tender, head to Piclo to see the exact regions.
- Watch out for the dates! UK Power Networks’ prequalification ends on 30th January with contracts awarded from 15th May