Pricing

21 Nov 2024
Avery Dekshenieks

ERCOT: How did battery energy storage perform in August 2024?

In August 2024, battery energy storage systems listed on Modo Energy’s ERCOT BESS Index earned average revenues of $87/kW (annualized).

$87/kW/year represents a 31% increase from the first seven months of 2024. May remains the most lucrative month of 2024 to date - with average revenues of $157/kW/year.

August provided even more uplift to battery energy storage revenues than the other summer months of June and July.

Adding the monthly revenues from June and July together results in annualized revenues of $69/kW/year. But August outperformed these two months by 25%.

What's behind the increase in revenue for battery energy storage in August?

August had more favorable conditions than the remainder of the summer for battery energy storage revenues by multiple measures.

Power price spreads in August 2024 were significantly higher than in June and July.

Higher average solar generation reduced prices in the middle of the afternoon and mid-morning. Meanwhile, lower average wind generation contributed to higher average net load during the evening peaks.

Additionally, August was a much hotter month than June or July. 15 days throughout the month had extreme peak temperatures in the DFW area of more than 100°F. June and July combined for just eight 100+° days. These translated to substantially higher demand in August, in turn contributing to 20% higher peaks in net load, on average.

This all resulted in higher average peak net load (+20%) during the month of August.

Higher net load peaks resulted in higher prices during the evening solar ramp - when prices now tend to peak in ERCOT. This, in turn, resulted in an increase in average battery energy storage peak output. In fact, peak total BESS net output was 53% higher than in June and July.

Revenues in August were largely concentrated across just a few days

Batteries in August earned 30% of their revenues on August 20th alone. This was an extremely hot day, where Real-Time Energy prices were near the $5,000/MWh price cap across the state.

Additionally, 58% of August revenues were earned in just four days. This illustrates how volatile battery energy storage revenues in ERCOT tend to be.

This is similar to 2023 when 50% of all battery energy storage revenues were earned in just 13 days.

So, how did August revenues compare from this year to last year?

Revenues in 2024 are significantly lower than in 2023

Monthly revenues were 93% lower than in August 2023 - when batteries earned $1,159/kW/year, predominantly from Ancillary Services (including the then newly launched ECRS service).

As was the case throughout this summer, system conditions this August have been drastically different from 2023.

Rapid battery buildout in ERCOT has brought increased competition to the Ancillary Service markets. This saturation has resulted in lower average prices across all Ancillary Services, and batteries have continued to shift their operational strategies.

Ancillary Service markets are increasingly saturated and total battery capacity in ERCOT continues to increase rapidly. This has meant that there’s an increasing amount of battery energy storage discharging during the evening peak in prices.

In turn, this has also contributed to declining Energy prices in the summer of 2024.

As batteries offer more capacity at competitive prices during the evening net load peak, they inherently reduce the prices observed.

How are battery energy storage revenue optimizations evolving?

August continued the ongoing trend of batteries performing Energy arbitrage by buying and selling power in the Day-Ahead Market. Additionally, August resulted in the highest monthly proportion of revenues from Energy arbitrage since batteries have entered the market.

In fact, revenue from trading the power price spreads accounted for 45% of the average battery's revenues.

This summer, an increasing proportion of revenues have come from the Day-Ahead Energy market. This signals an increase in optimization complexity. Battery owners and optimizers have begun to attempt to evaluate which of the Day-Ahead or Real-Time markets is likely to produce a larger Energy arbitrage spread.

Additionally, some batteries selling power in the Day-Ahead Market have begun to utilize the flexibility of Day-Ahead to Real-Time settlement to earn revenue - sometimes even without cycling.

Fifteen out of the top sixteen performing sites in August 2024 earned more than half of their revenues from Energy markets.

Each of the top seven sites by revenue performance earned near-zero revenues from the Day-Ahead Energy market. This is likely because on the highest-priced days of the month - like August 20th, when most of the revenue was earned - the Real-Time Market had higher prices than the Day-Ahead Market.

Subscribers to Modo’s ERCOT products can continue reading below to find out:

  • how the overall growth in the proportion of revenues from Energy arbitrage is especially apparent when looking at the revenue of individual sites,
  • which sites in particular tended to focus more on Real-Time vs. Day-Ahead Energy arbitrage,
  • and which owners of battery energy storage came out on top of the leaderboard in August.

How did individual BESS revenues vary in August?

The highest-earning batteries in August 2024 earned a majority of their revenues from Energy arbitrage.

Contrary to previous months, where specific owners have tended to clearly place highest on the leaderboard, August 2024 saw a wider range of owners outperform the Index.

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