Ancillary Service prices have decreased in the last two years - relative to Energy prices - and battery energy storage systems are a big reason why.
Batteries have become the dominant provider of Ancillary Services in ERCOT. In fact, in the month of May, batteries provided 42% of all volume offered into Ancillary Service markets. This rises to 58% if excluding Non-Spin, the only service with significantly less than 50% of volume offered by batteries.
Batteries are now also consistently offering well over 100% of the procured volume for:
- Responsive Reserve (RRS), and
- the Regulation services.
In May, battery energy storage systems also offered around 89% of the procured volume for the ERCOT Contingency Reserve Service (ECRS), on average.
This means that batteries now provide around 55% of all procured Ancillary Service volume in real-time. This rises to around 70% when excluding the Non-Spinning Reserve Service.
As more storage is developed, more storage owners enter the picture. And, as the number of asset owners in ERCOT grows, operational strategies continue to diversify.
Modo subscribers can read the rest of the report below - find out:
- What proportion of Ancillary Service offers come from each battery energy storage owner.
- How different asset owners are pricing into Ancillary Services. Which owners are ‘price takers’, and which are ‘price setters’?
- And how those offer prices stack up against Ancillary Service clearing prices.
Battery energy storage offer volume largely comes from just a handful of asset owners
Naturally, the asset owners that have the most installed rated power tend to provide the most offer volume.
The majority of the volume offered by battery energy storage comes from just a few asset owners.
- Responsive Reserve (RRS) has the most owner diversity - with 35% of all volume offered by batteries coming from asset owners outside of the top five (in terms of total volume offered).
- Alternatively, just five asset owners provided 99.9% of the battery volume offered for Non-Spin.
But simply looking at offer volumes doesn’t tell the full story.
To get a better idea of how batteries are impacting prices, we need to look at the prices of these offers.
Some battery energy storage owners are ‘price-takers’, while others are ‘price-setters’
Recently, we examined how battery energy storage systems offer their volume into Ancillary Service markets - compared to other technologies.
However, among individual batteries and asset owners, those offer prices can differ substantially.
To understand how asset owners contribute to Ancillary Service price formation, we need to look at the distributions of their offer prices. Essentially, we need to consider the prices at which batteries offer their volume, and the amount of volume offered at that price. This is known as volume-weighting.
Let’s look at the volume-weighted distributions of offers from battery owners in ECRS.
About 16% of battery energy storage volume was offered at or near the $5,000/MW cap by battery energy storage. These offers are likely irrelevant (unless an extremely rare loss of load event is anticipated) - so, we have excluded them from this analysis.
In ECRS, some battery energy storage owners clearly offered in as ‘price takers’ - meaning they were willing to carry responsibility for the service, almost regardless of the price they would receive.
These ‘price takers’ included: Jupiter Power, Aypa Power, and Hunt Energy Network.
Each of these owners offered at least 75% of their volume at prices below the median ECRS clearing price of $2.99/MW/h in May.
Conversely, Eolian and Plus Power acted more as ‘price setters’.
Eolian often offered at lower prices, close to the clearing price, suggesting they helped lower clearing prices (while still receiving ECRS awards at a higher price than other owners were willing to take).
Plus Power's offer prices closely matched the clearing price distribution. However, their median offer price was 67% higher than the median clearing price - which indicates they were less likely to exert downward pressure prices than other owners.
How did this differ across other Ancillary Services?
Some similar patterns emerged in Responsive Reserve and Regulation Up.
In the Responsive Reserve Service, National Grid Renewables stands out as a true ‘price-taker’. They were one of the ten largest providers of battery volume into RRS, but almost exclusively offered volume for near-zero prices.
This means they were truly willing to take any price to be awarded RRS responsibility.
Many other owners offered volume at a rate competitive with the offer price, but consistently below it.
For instance, Vistra and Eolian each offered at least 75% of their volume at prices below the median RRS clearing price of $1.65/MW/h.
But what did Regulation Up offers look like?
In Regulation Up, another persistent ‘price taker’ emerged. NextEra - like National Grid in RRS - consistently offered all of their volume for near-zero prices.
Once again, some battery energy storage owners consistently offered their volume near the clearing price. This again included Eolian, and also ENGIE - whose offer distributions strongly resemble the clearing price’s. ENGIE’s median offer price was only 9% above the median clearing price.
This indicates that these owners were consistently helping to set the clearing price in Regulation Up.
How might this change?
Ultimately, as more battery energy storage systems come online and enter Ancillary Services as ‘price takers’, more downward pressure will be exerted on clearing prices.
This will continue to exacerbate the saturation of Ancillary Service prices (relative to Energy prices). This, in turn, will reduce total costs for the end consumer in the ERCOT market.