In January through May 2024, battery energy storage systems across all of ERCOT earned revenues of around $76,000/MW/year, on average.
However, a battery’s location had a drastic impact on its performance. During this period:
- Batteries in the West Load Zone earned around $91,000/MW (annualized), outperforming the index by 21%.
- And, in contrast, batteries in the North Load Zone earned around $56,000/MW (annualized), underperforming the index by 25%.
This translates to 62% higher revenues for West Load Zone batteries, on average, compared to batteries in the North Load Zone.
What are the main reasons behind these regional differences?
Energy arbitrage opportunities by region
Unlike Ancillary Service prices, which are system-wide, energy prices are locational. Locational prices reflect the transmission constraints that arise when transporting power across long distances.
Some regions experience larger intraday price spreads than others as prices vary across the system.
Battery energy storage systems, which act as both load - when charging - and generation - when discharging - earn revenues from arbitraging these spreads.
Thus, higher price spreads = higher revenue opportunities.
Batteries located in the West saw average daily two-hour price spreads of $211/MWh. This means that a battery in the West could have earned up to $211/MWh, on average, by:
- Charging during the two lowest-priced hours of the day. This is typically around midday when solar generation is at its highest.
- And discharging during the two highest-priced hours of the day. This is typically in the evening during the net load ramp, as the sun sets.
West Texas offers large price spreads mainly due to its large buildout of wind and solar resources.
In the middle of the day, ERCOT often has to curtail renewable generation in West Texas. This is because stability constraints arise when transmitting large amounts of power from West Texas to the state's demand centers, like Dallas, Austin, and Houston.
This often leads to prices in West Texas being below prices across the rest of the state.
North Texas saw average daily two-hour price spreads of $182/MWh, meaning its revenue opportunities were 14% lower, on average, than in West Texas.
Subscribers to Modo’s ERCOT products can continue reading below. Learn more about the regional differences in:
- How battery energy storage revenues differed across regions in ERCOT.
- The differences in operational strategies employed by batteries across each region.
- How often batteries in different regions are cycling.
How did battery energy storage in each region earn their revenues?
Battery energy storage systems in West Texas earned the most revenues, on average, from January through May 2024.
But which revenue streams were the keys to this success?