In September 2024, battery energy storage systems listed on Modo Energy’s ERCOT BESS Index earned annualized average revenues of $22/kW.
This was a 75% decrease from August, when batteries earned an average of $87/kW/year.
$22/kW/year also represents a 67% decrease from average revenues across the first eight months of 2024.
BESS revenues in September were down as a result of essentially no volatility in power prices. Relatively mild weather conditions meant that average demand in September was around 4.7% lower than in September 2023 - falling from 60.1 GW to 57.3 GW.
This was paired with continued solar and BESS buildout - more than 4 GW of capacity has been added of each technology type in the last 12 months. Additionally, there were minimal thermal generation outages in September - less than 9 GW for the majority of the month - as thermal resources had yet to enter the maintenance season of the later fall months.
This culminated in power price spreads that were the lowest since February. In fact, one-hour spreads for the month averaged just $63/MWh.
Despite the overall lack of volatility, September 2024 was the first month where battery energy storage systems earned a majority of their revenues from Real-Time and Day-Ahead Energy markets.
In September, batteries earned 58% of their revenues from Energy arbitrage, the highest-ever proportion.
This is because Ancillary Service prices fell to five-year lows in September, with average clearing prices of $1.93/MW/h.
The lack of volatility in the Energy markets wasn’t the sole cause of reduced Ancillary Service prices. Additionally, saturation in the markets as the installed capacity of battery energy storage systems continues to grow also has influenced Ancillary Service prices.
How did revenues differ across battery durations and individual systems?
Lower proportions of revenues coming from Ancillary Services is a universal trend across batteries of all durations. However, it is particularly noticeable for longer-duration batteries.
These systems have the inherent advantage of being able to capture large energy spreads over a longer period of time throughout the day, while still being able to reserve some capacity for Ancillary Service responsibility.
In fact, two-hour duration batteries earned higher revenues from solely Energy arbitrage than one-hour batteries earned in total, on average.
As a result, individual battery energy storage systems that prioritized Energy arbitrage generally outperformed the ME BESS ERCOT Index.
In fact, the top eight performing battery energy storage systems in ERCOT all earned 80% of their revenues, or greater, from Energy arbitrage.
If your organization has a subscription to Modo Energy’s ERCOT products, you can access the rest of the article below. Find out:
- which battery finished on top of the leaderboard in September, and why,
- how battery owner portfolios compared - both by strategy and performance,
- and how battery energy storage revenues varied by region - is the West still the most lucrative Load Zone for batteries in ERCOT?
How did individual BESS revenues vary in September?
The highest-earning batteries in September 2024 earned a majority of their revenues from Energy arbitrage.
One battery - Deep Greek, owned by Gore Street Capital - was able to earn annualized revenues of $96/kW over the course of September. This was over four times the ME BESS ERCOT Index, and 39% more than the battery that earned the second-highest revenues.
This was because this battery benefitted from prices at its settlement point rising above $1,000/MWh on multiple operating days toward the end of the month. While Deep Greek’s local prices were high, system prices stayed below $200/MWh.
This is an example of 'nodal basis', when transmission congestion causes some locational marginal prices (LMPs) to be higher - sometimes substantially higher - than the majority of LMPs across the system.
By capturing the Energy arbitrage spread on days when its local price far exceeded LMPs across the system, Deep Greek earned substantially higher revenue than any other battery in ERCOT.
Which owners performed the strongest in September 2024?
In September 2024, both Plus Power and Jupiter Power outperformed the ME BESS ERCOT Index, continuing their success from August. Additionally, Gore Street Capital, Hunt Energy Network, and Eolian all outperformed the Index.
The consistent theme amongst all of these owners is they earned at least 50% of their revenue from Energy arbitrage.
Of note, however, is that most of these market participants generally own two-hour duration batteries.
The top five owners by average revenue, on a per-installed-kW basis, have average battery durations of at least 1.7 hours.
Hunt Energy Network is the exception, with a portfolio made up of exclusively one-hour duration batteries.
To normalize by duration, let’s look at battery energy storage revenue on a per-kilowatt-hour basis.
Naturally, normalizing for energy capacity rather than rated power favors owners with shorter-duration resources.
However, the key takeaway is that portfolios that earned higher proportions of revenue from Energy arbitrage still outperformed the Index.
On the other hand, portfolios that focused more on Ancillary Services, no matter their duration, tended to underperform the Index.
How did location impact battery energy storage revenues in September?
Unlike Ancillary Service prices, which are cleared at the system level, Energy prices are locational. In other words, each battery energy storage system across the system sees a unique Energy price.
This makes the location of a battery critical to the revenue opportunities available for capture.
Batteries in West Texas earned higher revenues than batteries in other regions. This is in part because batteries in the West Forecast Zone have the highest duration of any region.
However, batteries in West Texas still had the highest average revenue of any region on a per-kWh basis.
In fact, on a per-kWh basis, they earned 70% higher revenues than batteries in the Coastal region., on average.
This is largely a result of larger average price spreads in West Texas. Those larger spreads occur primarily for two reasons:
- the largest concentration of solar generation of any region in ERCOT,
- and high industrial demand that consistently consumes power, even during off-peak periods.
High solar generation often results in the West Hub’s prices being lower than other regions’ during the mid-morning hours when the sun is rising. This is due to relatively low demand on the system and higher curtailment of excess solar generation for which there is insufficient transfer capacity to move to demand centers further East.
Conversely, prices in West Texas can actually be higher in the evening once the sun has set and the region occasionally becomes a net importer of power to serve industrial demand - particularly oil and gas infrastructure demand in the Permian Basin.
What does September 2024 reveal about battery energy storage revenues in ERCOT?
September 2024 continued the shift away from Ancillary Services and into Energy markets, and market participants continue to gain experience in Energy arbitrage optimization.
This shift into Energy markets is particularly prevalent in months where overall revenues are low. This is highlighted by December 2023, February 2024, and now September.
Overall, battery energy storage systems that participate predominantly in Energy markets, both among one-hour and two-hour resources, have consistently earned the highest revenues in recent months.
Check back in with us next month for an update on battery energy storage revenues through October 2024.