Battery energy storage revenues reached £46k/MW/Year in August. This was helped by record Balancing Mechanism revenue, and is the highest figure since November 2023. The highest-earning one-hour battery performed no frequency response services in August, the first time this has ever happened.
In our market update, we discuss battery revenues including Capacity Market earnings, on a £/MW/year basis. For monthly battery operations updates, we will discuss revenues excluding the Capacity Market. That’s because operational strategy does not affect Capacity Market revenue.
Balancing Mechanism revenue helps batteries top the leaderboard
Minety Upper was the highest-earning one-hour battery in August, outperforming the one-hour BESS Index by 25%. It is the first system to top the monthly leaderboard while performing no ancillary services.
Meanwhile, Hawkers Hill was the top-performing two-hour battery this month. Common across both systems were the highest cycling rates for their respective duration. Both systems earned the highest Balancing Mechanism revenues too.
Elsewhere, two batteries from Northern Scotland also featured in the top 5 performing one- and two-hour systems this month. These batteries earned negative Balancing Mechanism revenue but much higher wholesale revenues than batteries elsewhere in GB.
High cycling helped both systems outperform the market
Hawkers Hill was the highest cycling two-hour asset in August, as cycling and revenues remained closely correlated for these batteries. Jamesfield 2, the 3rd best-performing battery, earned the highest revenue per cycle this month.
The link between cycling and revenues strengthened for one-hour batteries in August, after a weaker relationship in July. Minety Upper was the highest cycling battery in August, helping it earn the most revenue of all one-hour systems.
Increased Offer dispatch volume and overall Balancing Mechanism revenue were key to the stronger relationship between cycling and revenues.
High Balancing Mechanism revenue helped batteries outperform a Dynamic Containment strategy
As demonstrated in July, Dynamic Containment can limit the uplift one-hour batteries receive from increasing cycling. Typically, bids for the service are linked to wholesale trading value, which can accurately be predicted a day ahead.
However, bids for the service have not yet begun to reflect the value that batteries could receive in the Balancing Mechanism. Therefore, as Offer volume and Balancing Mechanism revenues rose to record highs in August, Dynamic Containment prices did not rise in line with this increased value. This meant batteries cycling more in the Balancing Mechanism in August outperformed those heavily contracted in Dynamic Containment.
However, despite the link between cycling and revenues in August, both Minety Upper and Hawkers Hill also benefited from Balancing Mechanism revenue earned without cycling.
Balancing Mechanism reversals can result in batteries earning revenue without exporting
Minety Upper and Hawkers Hill’s high Balancing Mechanism revenue was helped by periods during which their wholesale imports were reversed through Offers. This meant that their net energy position was close to 0 MWh. At the same time, they could earn revenue on the spread between wholesale and Offer price.
Both batteries experienced this on August 17th. Hawkers Hill was set to import 30.5 MWh from wholesale markets between 1 and 3 p.m., However, it then received Offer dispatches through the Balancing Mechanism, negating these planned charges. This meant it only imported 0.2MWh over that time. The battery earned £70/MW in the two-hour period Because the Offers were priced higher than the wholesale price. All other two-hour batteries averaged just—£1/MW.
Minety Upper was dispatched for Offers in a similar manner at 6 p.m., earning twice as much revenue as other one-hour batteries while exporting just 2 MWh.
Throughout August, these two batteries saw some of the highest volumes of these reversals of all systems.
Batteries in Southern England received the most Balancing Mechanism reversals
Minety Upper and Hawkers Hill are both located in the Southern GSP zone. Transmission constraints can limit the amount of power that can flow into this area during high demand.
Batteries in the South of England had 5.3 GWh of wholesale imports reversed by Balancing Mechanism Offers in August - the most of all regions. When normalized for the volume of batteries in each location, batteries in this region still saw more reversals than anywhere else.
While Offer reversals helped batteries in South England earn high Balancing Mechanism revenue, Bid reversals contributed to high wholesale revenues for batteries in the North of Scotland. This region is constrained by the amount of power that can flow out of it.
System-flagged Bids reversed wholesale exports in North Scotland
The volume of Bids that reversed wholesale actions of batteries in North Scotland increased to 3.9 GWh from 2.7 GWh in July. However, the proportion of these actions that were system-flagged also rose - transmission constraints meant that batteries were instructed to reduce their energy exports more often in August.
Batteries in the region benefitted from this increase in Bid dispatches, which helped them generate high wholesale revenues. These Bid reversals contributed to Jamesfield 2 earning the highest wholesale revenue of any battery.
Jamesfield 2 earned wholesale revenue without exporting power
There were instances in August where Jamesfield 2 was scheduled to sell power over peak, which was subsequently reversed via Bids. This earned the system a spread between wholesale and Bid price, while leaving it with energy it could subsequently sell later.
An example of this came on August 20th, when Jamesfield 2 earned 33% more than average for a two-hour battery.
Between 7 and 11 p.m. Jamesfield 2 sold 48 MWh into the wholesale market. However, system-flagged Bids reversed its planned exports, meaning it only exported 2.8 MWh across this period. During this time, it earned £137/MW and still had energy remaining to earn additional wholesale revenue in the final hour of the day.
This example shows how the national electricity price in Great Britain can sometimes incentivize batteries to operate in a way that is counter to what is needed at a regional level. This has been one of the reasons behind calls for a change to zonal price, which is being explored within the second REMA consultation.