So far in 2024, 26% of battery energy storage revenues in ERCOT have been earned via Energy arbitrage - up from just 15% in 2023.
But what’s behind this increase?
More battery energy storage capacity is free from Ancillary Service commitments
As the buildout of batteries in ERCOT has continued, Ancillary Service prices - relative to Energy prices - have declined.
With increased competition in the Ancillary Service markets, more battery energy storage capacity is available for Real-Time Energy dispatch.
With more capacity available in Real-Time, batteries have consistently provided more output to the grid.
In fact, in the most recent thirty days of operations, the peak 15-minute total net output of all battery energy storage systems averaged nearly 1.5 GW.
Across the same thirty-day period last year, the average peak net output was less than 400 MW, representing an increase of more than 4x.
Real-Time Energy prices are also key in determining how much storage is dispatched. In order for a battery - or any other type of generation - to be dispatched by ERCOT’s economic dispatch, its Energy Offer Curve must be at or below the Energy price at its location, otherwise known as the Locational Marginal Price.
So, how do Real-Time prices in the last thirty days compare to prices over the same period last year?
Real-Time prices in the last 30 days are significantly lower than the same time last year
Real-Time Energy prices averaged just $26/MWh in the most recent 30 days of operations. This is a 69% reduction from the average of $84/MWh over the same period last year.
Prices in July and August of 2023 were substantially higher than to this point in 2024.
However, on an average day, battery energy storage systems increased their peak net output by more than 4x.
For batteries to provide substantially more output to the grid in 2024, they would have needed to offer capacity into the Real-Time Market at much lower prices.
Modo subscribers can read the rest of the report below to learn:
- How battery energy storage Energy Offer Curves compare to other technology types.
- The differences in Energy Offer Curves among different battery energy storage owners.
- And how those offer curves have changed since last year.
How do the Energy Offer Curves of battery energy storage systems stack up to other technology types?
Batteries in ERCOT offer to sell energy in the Real-Time Market at a price higher than most other generation types.
In fact, their volume-weighted median offer price remains at the $5,000/MWh offer cap.
This is largely to do with the fact that batteries have a high opportunity cost.
If a battery discharges some of its stored energy, it must charge again to restore its depleted state of charge. If it discharges during a period when prices aren’t at their peak on a given day, it misses out on extracting the highest revenues.
More importantly, it has less energy to provide to the grid when supply is most scarce.
However, there is some evidence that batteries are beginning to offer some capacity into the market at lower prices.
Batteries are still offering over 50% of their capacity at or near the $5,000/MWh offer cap.
However, at the lower end of the offer curve distribution, prices are beginning to decrease.
Over the time period used for this analysis - May 16th through June 15th, 2023, and the same period in 2024 - the 25th percentile of battery offer volume decreased by 17% from $300/MWh to $250/MWh.
The 5th percentile of offer volume has also decreased significantly, from $60/MWh to $47/MWh.
This decrease has largely occurred as a result of:
- More batteries coming online, making both the Ancillary Service and Real-Time Markets more competitive.
- Declining revenue opportunities in the Ancillary Service markets as prices decrease relative to Energy prices.
With increased competition for battery energy storage in the Real-Time Energy markets, some market participants have begun to lower their offer prices to provide Energy.
But who are they?
Which owners of batteries tend to offer their capacity at lower prices?
For battery energy storage systems to still have a volume-weighted median offer price of $5,000/MWh, most owners must also be offering at least 50% of their capacity near the price cap.
However, there are a few owners that offer at least 50% of their capacity at a price below $5,000/MWh.
Now, let’s look at a smaller proportion of battery energy storage capacity.
Numerous battery owners have begun to offer at least 25% of their volume in the Real-Time Market at more competitive prices.
In fact, some of the largest owners of batteries by total installed rated power - like Eolian, Key Capture Energy, and ENGIE - have begun offering 25% of their available capacity for $100/MWh or less.
Which owners have made the biggest changes since 2023?
Let’s examine the 25th percentile volume-weighted offer prices for batteries over the same period last year.
The number of battery energy storage owners that offer at least 25% of their capacity below the $5,000/MWh offer cap has increased substantially.
Fifteen owners offered at least 25% of their capacity below the offer cap from May 16th through June 16th of 2024, compared to just seven over the same period in 2023.
Furthermore, owners that offer some capacity at relatively low prices have begun to reduce their offer prices.
For instance, six different owners had a 25th percentile offer price of $100/MWh or less, compared with just one - ENGIE - over the same period last year.
Will this downward trend continue?
The buildout of battery energy storage isn’t slowing down any time soon. As more batteries reach commercial operations, the Ancillary Service and Real-Time markets will both continue to become more competitive.
Additionally, the average duration of batteries in ERCOT continues to increase. This helps reduce the opportunity cost for batteries when discharging.
This means that battery offers in both markets will continue to decrease.
As a result, batteries will continue to be dispatched more frequently, and with a greater magnitude.