If a battery energy storage system beats Modo’s ERCOT BESS Index, it can reasonably claim to have been successful. But simply beating the Index doesn’t mean that a battery performed optimally.
Battery energy storage operations can be complex. Two systems with similar attributes (e.g. rated power and capacity) can implement entirely different strategies - and still generate almost identical revenues.
Take Sweeny (owner: ENGIE) and Faulkner (owner: Hunt Energy Network). Both are 9.9 MW, one-hour Distributed Generation Resources (DGRs).
From April 1st 2023 through March 31st 2024, both sites were available more than 99% of the time.
And both earned very similar revenues during this period - around $225,000/MW.
This meant that both systems outperformed:
- The overall ERCOT BESS Index for this period ($195,000/MW) by 15%.
- And the Index for DGRs ($140,000/MW) - represented by the black dotted line below - by 60%.
Therefore, both of these systems were extremely successful during this twelve-month period.
However, despite having very similar revenues, these two sites operated very differently.
Modo’s ERCOT subscribers can access the full article below - to compare these sites by:
- Capacity allocation.
- Revenue streams.
- Cycling rates.
- And what this all meant in terms of their preferred strategies.
With Modo Energy’s ERCOT benchmarking tools, you can carry out this type of analysis yourself.
Check out this comparative dashboard of the two sites tracked in this article (Sweeny and Faulkner) for the 2023 calendar year.
Compare your sites against your competitors’ - with insights into how operational decision-making is affecting performance.
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Which markets did these battery energy storage systems allocate their capacity to?
Capacity allocation is the best indicator of a battery energy storage system’s preferred operational strategy. Revenue proportions offer some indication - but they aren’t always completely representative of where a system places most of its chips.
Sweeny allocated significant capacity to most major battery energy storage markets and services
Sweeny implemented a very balanced operational strategy. It allocated significant capacity to most of the major markets and services for battery energy storage:
- It allocated 37% of its capacity to Regulation Up and Down.
- 37% of its capacity to Energy arbitrage.
- And 24% of its capacity to Responsive Reserve.
It allocated less of its capacity to Energy markets during the summer. However, the proportion of its capacity allocated to different markets and services over the year was generally pretty consistent.
Following the launch of ECRS in June 2023, Sweeny has only ever allocated a maximum of 2.5% of its monthly capacity to the service.
However, this capacity allocation didn’t correlate with its revenue proportions.
- Despite allocating 37% of its capacity to Regulation, 54% of Sweeny’s revenues came from these services.
- And despite allocating 37% of its capacity to Energy, only 12% of its revenues came from those markets.
Faulkner implemented a Reserve-dominant strategy - and allocated very little capacity to Regulation services
Faulkner, on the other hand, implemented a different strategy. Throughout the year, it allocated the vast majority of its capacity to Reserve services and Energy markets - and performed very little Regulation.
- It allocated 48% of its capacity to Responsive Reserve.
- 39% of its capacity to Energy arbitrage.
- And 10% of its capacity to ECRS.
Its capacity allocation in Energy markets was consistently higher during the winter and spring months than during the summer. The difference was occasionally drastic - in April, it allocated 77% of its capacity to Energy; in August, that dropped to just 7%.
Following the launch of ECRS in June, Faulkner began participating massively in Reserve services - both ECRS, and Responsive Reserve (RRS). In August, it allocated 29% of its capacity to ECRS, and 63% to RRS.
Again, this capacity allocation didn’t correlate directly with its revenue proportions.
- Despite allocating 10% of its capacity to ECRS, 20% of Faulkner’s revenues came from the service.
- And despite allocating 39% of its capacity to Energy, only 27% of its revenues came from those markets.
How many cycles did these battery energy storage systems perform during this period?
Sweeny’s participation in Regulation services led to much higher cycling rates. During this twelve-month period, it performed 1.47 cycles per day (on average). This was more than double the average cycling rate of DGRs in ERCOT during this period.
Because Regulation services respond to small deviations in frequency, battery energy storage systems with Regulation contracts are likely to be physically deployed more regularly. Therefore, batteries that allocate more capacity to Regulation tend to perform more cycles.
On the other hand, Faulkner’s Reserve-dominant strategy allowed it to capture huge revenues during price spikes in these services, while being dispatched less frequently.
As a result, Faulkner performed just 0.52 cycles per day - 65% fewer cycles than Sweeny.
Higher cycling leads to faster battery degradation, increased downtime, and potential warranty issues. Because of this, owners and operators need to consider the cost of increased cycling when deciding on their operational strategy.
Check out our deep dive on the the value of a battery energy storage cycle in ERCOT to learn more.
As such, Faulkner earned roughly 3x higher revenues per cycle during this period.
How did each site capitalize on its highest-earning days?
Across the twelve-month period, both battery energy storage systems were able to maintain availability of more than 99%.
To find out how availability affects battery revenues in ERCOT, check out our previous deep dive.
Both batteries earned roughly $100,000/MW in just ten days during this period. Therefore, it’s crucial that batteries remain available to operate during the most lucrative times of the year.
For example, on August 25th, both sites earned around $20,000/MW. If they had been unavailable on this day, their revenues across this period would’ve been 9% lower.
And, on this day, their strategies were very different.
Sweeny earned 73% of its August 25th revenues in Regulation Up and Down.
And Faulkner was equally successful in terms of revenues - but 85% of its earnings came from Reserve services (RRS and ECRS).
Summary: Sweeny vs. Faulkner
Over this period, Sweeny’s relatively balanced operational strategy remained consistent throughout the year. It allocated a relatively large proportion of its capacity to Regulation services - which led to above-average revenues, at the expense of an above-average cycling rate.
Faulkner performed a more targeted operational strategy - prioritizing Reserve service participation in the high-priced summer months, and prioritizing favorable energy arbitrage opportunities in its West Texas location during the winter and spring months. This also led to above-average revenues, but with higher variance month-to-month, and a much lower cycling rate.
There isn’t a “correct” strategy, and both of these battery energy storage systems comfortably outperformed the Index.
Faulkner’s higher revenues per cycle mean that it was the more successful of the two during this period - but it also required greater operational complexity throughout these twelve months.