In the last six months of 2023, battery energy storage systems in ERCOT earned $1,963/MW for every cycle they performed.
However, the revenues that individual systems earned per cycle varied massively. Some batteries made less than $500/MW for each cycle they performed, while one particular system hit $15,000/MW per cycle.
Note: This is total revenues ($/MW) earned across Energy markets and Ancillary Service contracts, divided by MWh actually dispatched into these markets.
This analysis only includes battery energy storage systems that participated in Energy and/or Ancillary Service markets for the entire six-month period (July to December 2023, inclusive).
So, why does the value of each cycle differ so wildly between systems? Which operational battery energy storage strategies require the most cycles? And how do revenues per cycle differ according to battery duration and size?
In this article, Benchmarking Pro ERCOT subscribers will also learn:
- Which operational strategies result in the most revenues per cycle.
- The number of cycles per day that each battery energy storage system in ERCOT performed across the six months.
- The revenues per cycle that every system earned.
- And the preferred operational strategies of some of ERCOT’s biggest battery energy storage owners - and what they meant in terms of both revenues and cycling rates.
But, before we dive into that, what is a battery energy storage “cycle”?
How to calculate a “cycle” for battery energy storage systems
A cycle means one full charge and discharge of a battery’s nameplate capacity. Therefore, we can assume a 100 MWh battery energy storage system has completed a cycle each time it has discharged 100 MWh.
This can either be done in one go, or in smaller bursts across a longer period of time.
More frequent cycling leads to faster degradation and lower maximum charging capacity, and can have warranty implications with cell manufacturers. This ultimately leads to higher maintenance costs, increased downtime, and decreased enterprise value of the battery.
How much do battery energy storage systems actually cycle?
On average, battery energy storage systems in ERCOT performed 0.77 cycles per day from July to December 2023 (inclusive).
However, there was a huge disparity in the cycling rates of individual systems. Some batteries carried out nearly two full cycles per day across the six months, while others averaged less than one cycle every ten days.
Why did cycling rates differ so much between batteries?
A large part of this was down to strategy - and, in particular, which Ancillary Service(s) a battery won more contracts to provide. This is because some services are far more likely to require physical dispatch than others.
Regulation Up and Down services tend to require physical actions more often than ERCOT’s Reserve services (ECRS and RRS). This is because they respond to smaller deviations in frequency (outside of 60 Hz). Participants are 13x more likely to have to physically respond if contracted.
To learn more about ERCOT’s Ancillary Services, check out The Energy Academy.
Because of this, battery energy storage systems that tended to carry more responsibility for Regulation cycled around 3x more often than those that carried more Reserve responsibility.
How do battery energy storage cycling rates (and revenues) differ by duration and size?
While strategy plays a large role in determining how many cycles a battery energy storage system performs, it’s not the only factor. Shorter-duration assets tend perform more cycles to compete for revenues with longer-duration systems.
The duration of an asset also has a massive bearing on which services it chooses to take part in. For example, the quick-responding nature of Regulation means that shorter-duration assets are able to bid in a higher proportion of their capacity to compete for contracts than in Reserve services (which require participants to deliver for longer periods, at times).
Therefore, assets that have a duration of under one hour had heavily Regulation-dominant strategies, and cycled more than other batteries. In doing so, they were able to compete with longer-duration systems in terms of revenue ($/MW).
Size (or rated power, measured in MW) also played a role - albeit a more subtle one - in determining which strategies batteries used, and how much they cycled. Smaller (<10 MW) assets were also more likely to perform more Regulation.
In part, this is likely because Regulation is a relatively small service - only a few hundred megawatts are procured at any given time. This makes it an attractive market for smaller assets. A smaller battery is more likely to bid a larger proportion of its nameplate capacity into the service.
So, currently, larger and longer-duration batteries are generally earning higher revenues while cycling less.
Below, Benchmarking Pro ERCOT subscribers will learn how much individual assets earned in between July and December 2023 - and which strategies were most lucrative.
You will also be able to compare the strategies of some of the biggest battery owners in ERCOT: ENGIE, Jupiter Power, and Key Capture Energy.
Which operational strategy is most lucrative for batteries?
Across the six months, ECRS and Regulation strategies were the most successful - in terms of overall revenues ($/MW).