In the first quarter of 2024, battery energy storage systems in ERCOT earned average revenues of around $54,000/MW (annualized).
You can track average revenues using Modo’s ERCOT BESS Index.
Some owners outperformed the Index - with portfolio makeup and operational strategies impacting revenues.
Not all portfolios are created equal. ERCOT has 24 different organizations that own grid-scale battery energy storage systems, each with a unique portfolio.
To compare owner portfolios more fairly, we need to account for:
- capacity and duration,
- operational complexity,
- and battery location.
With that in mind, let’s look at the strategies of ERCOT’s largest battery energy storage owners.
How did the top five owners (by rated power, in MW) perform in Q1 2024? What does the makeup of their portfolios look like? And which operational revenue strategies were most successful?
Just five organizations own 55% of all battery energy storage rated power in ERCOT
As of the end of Q1 (January to March, inclusive), there were more than 110 commercially operational grid-scale battery energy storage systems connected to the ERCOT grid. The rated power of these batteries totaled around 4.4 GW.
The five largest owners in ERCOT (by total installed rated power) made up 55% of this.
These five owners are:
- Jupiter Power.
- Enel Green Power.
- ENGIE.
- Plus Power.
- Key Capture Energy.
These owners have different portfolio makeups. Jupiter Power and Plus Power tend to favor larger (in MW), longer-duration systems - whereas Key Capture and ENGIE have developed portfolios with smaller, shorter-duration batteries.
All of Enel Green Power’s batteries are co-located with large solar or wind facilities.
How did the five largest battery energy storage owners perform compared to the ERCOT Index?
Four of the five largest owners outperformed the ERCOT BESS Index by at least 20% in Q1. However, the proportion of revenues that these owners earned from each market differed dramatically.
Plus Power and Jupiter Power earned a relatively large portion of their revenues from Energy arbitrage. Both owners’ portfolios contain predominantly two-hour systems, which are better placed to take advantage of the Real-Time Market.
Because of this, assessing revenues on a per-megawatt basis doesn’t give us an apples-to-apples comparison.
Theoretically, when normalizing by rated power (MW), two-hour systems should always earn more revenue than one-hour systems. They can discharge for longer during peak times, and enter a larger proportion of their capacity into longer-lasting Ancillary Services like ERCOT’s Contingency Reserve Service (ECRS) and Non-Spinning Reserve (Non-Spin).
When normalizing by installed capacity, only two of the “big five” outperformed the Index in Q1
When normalizing by rated power (MW), Plus Power’s average portfolio revenues in Q1 were 37% higher than the Index. However, when normalizing by installed capacity (MWh), its portfolio underperformed the Index by 10%.
Plus Power operates just three assets, all of which are 100+ MW, two-hour systems. These two-hour batteries are well-suited to participate in Energy markets (because they can cycle twice as often if necessary) and ECRS (because they don’t have to de-rate their capacity to participate), but have no real competitive advantage in Regulation or Responsive Reserve Services.
Across both metrics, Key Capture Energy and particularly ENGIE performed well - beating the Index, whether normalized by rated power or installed capacity.
This outperformance stems from the makeup of their portfolios. For example, ENGIE operates fifteen individual 9.9 MW, one-hour batteries. These are known as Distributed Generation Resources (DGRs) - they’re less than 10 MW in size, often connected to the distribution network, and not subject to the same stringent qualification process as larger battery energy storage systems.
Their small size makes them relatively inexpensive to build, and their DGR status means that they can start earning revenues sooner than other systems. They are also well-suited to the relatively small (in terms of megawatts contracted) Regulation and Fast Frequency Response (a subset of RRS) services. In fact, ENGIE’s portfolio earned more than 87% of its revenues from Regulation and RRS in Q1.
Enel Green Power’s portfolio was the lowest-earning of the five across both metrics. However, its battery portfolio consists solely of systems co-located with much larger wind and solar sites. This can lead to limits on how much energy the battery can export at peak times, and also means that battery revenues may be a secondary concern (and essentially a ‘top-up’ for Enel’s renewable revenues).
Case study: Jupiter Power and Key Capture Energy
Jupiter Power’s portfolio consists of predominantly two-hour battery energy storage systems. On average, its batteries outperformed the $/MW revenue benchmark by 28%.
Its sites generally carry out a balanced operational strategy - and are able to take advantage of any arbitrage opportunities that arise during those periods of the year when overall battery revenues (and Ancillary Service clearing prices) tend to stay relatively low.
Six of its nine batteries earned more than 50% of their revenues from Energy markets in Q1.
House Mountain and St. Gall are both relatively new systems - they became commercially operational after the high prices brought about by Winter Storm Heather.
Crossett Power 1 is managed by Equilibrium Energy and Hatch Renewables, as part of a tolling agreement.
Key Capture Energy’s portfolio had an entirely different strategy. Made up almost entirely of one-hour batteries, Key Capture’s portfolio similarly outperformed the benchmark by 20% (on average), largely due to revenues from Reserve services (Responsive Reserve, and ERCOT’s Contingency Reserve Service).
Key Capture Energy’s portfolio earned 95% of its revenues from Reserve services. This strategy was highly lucrative throughout Q1 - and also resulted in Key Capture’s batteries performing relatively few cycles.
Key Capture Energy’s revenues per cycle in Q1 were the highest of the “big five” owners
In Q1 2024, battery energy storage systems in ERCOT performed 0.74 cycles per day (on average).
Higher cycling leads to faster degradation, lower maximum charging capacity, and can have warranty implications with cell manufacturers. As such, high cycling rates can devalue the battery due to higher maintenance costs and increased downtime.
To learn more about the value of a cycle for battery energy storage systems in ERCOT, check out our deep dive here.
With its Reserve-heavy strategy, Key Capture Energy kept its cycling rates low during Q1. Reserve services are only physically deployed once certain criteria have been met, and ERCOT uses Regulation Up and Down to respond to small deviations in frequency before that happens.
Because of this, batteries with Regulation contracts are likely to be physically deployed more regularly, and therefore perform more cycles. And batteries that win more Reserve contracts cycle less - and earn more revenue per cycle.
With its low-cycling strategy and above-average revenues, Key Capture Energy had arguably the most successful portfolio in ERCOT in Q1 2024.
However, there isn’t one single correct strategy, and each of these owners will define success in different ways - depending on their overall strategy.