Co-locating a battery energy storage system with a wind or solar site has a number of benefits. It means power can be stored when the wind is not blowing or the sun is not shining. Co-location also presents a unique arbitrage opportunity. The battery can charge up using excess (or curtailed) renewable power, and discharge onto the grid when prices are high.
But what are co-located battery energy storage systems in ERCOT actually doing? What do their revenues look like? And how could wind and solar sites benefit from co-locating a battery?
How do co-located battery energy storage revenues compare to standalone systems?
In general, co-located battery energy storage systems in ERCOT earn lower revenues than standalone systems.
- In the first four months of 2024, standalone grid-scale batteries in ERCOT earned an annualized $65,000/MW (on average).
- Batteries co-located with wind or solar sites earned 52% less during the same period - an average of $32,000/MW/year.
In fact, every single co-located battery in ERCOT underperformed the Modo BESS Index during this period. (The ERCOT BESS Index was around $55,000/MW/year, from January through April 2024.)
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How do co-located battery energy storage systems operate, compared to standalone systems?
It’s not really fair to simply compare the revenues of standalone and co-located batteries. The purpose of co-located battery energy storage is to optimize the cumulative performance of both the battery and the generation resource (wind or solar, in most cases).
Co-located battery energy storage systems can help to mitigate the opportunity costs associated with curtailment.
Curtailment occurs when a generation resource is instructed to turn down, derate, or shut off entirely - because there is an excess of power on the grid. With a co-located battery energy storage system, this lost output can instead be diverted to charge the battery. The battery can then discharge later, when prices are higher - to earn revenues.
Because of this, the daily charge and discharge behavior of co-located batteries differs from that of standalone systems.
While the general shape is the same among all battery energy storage systems, their charge and discharge levels differ at certain times:
- Standalone batteries tend to charge more overnight, and then discharge a higher proportion of their power in the morning (roughly between 6am and 8am).
- The charge/discharge shape for batteries co-located with wind sites is much flatter throughout the day.
- Batteries co-located with solar have the largest average within-day spread between their peak charge and peak discharge. They charge heavily during mid-morning (when solar generation tends to peak) - and then discharge heavily later, as solar generation ramps down.
Modo Energy’s ERCOT subscribers can check out the rest of the article below. Read on to find out:
- Which markets and services do co-located battery revenues come from?
- What are the revenue opportunities that co-located batteries provide - based on case studies of actual wind and solar sites in West Texas?
Which markets and services do co-located battery energy storage revenues come from?
From January through April 2024, standalone batteries earned 73% of their revenues from Ancillary Services. Revenues came from a well-balanced combination of Responsive Reserve (RRS), Contingency Reserve (ECRS), and Regulation services.
During the same period, co-located batteries earned more than half of their revenues (52%) from Responsive Reserve - and .