On September 10th, average revenues for battery energy storage systems in Great Britain hit their highest level since October 2023. This was helped by batteries earning their second-highest daily Balancing Mechanism revenue ever. Let’s take a look at why this happened, and which battery earned the most revenue on this day.
High Balancing Mechanism revenue combined with above-average wholesale earnings
Of the total £97k/MW/year of average earnings for the day, the Balancing Mechanism contributed £38k/MW/year. This was 7% lower than the record set on August 12th. However, this combined with wholesale revenue that was 25% higher than last month’s average to result in higher overall earnings. By contrast, wholesale revenue on August 12th was 33% lower than the yearly average.
There is normally a trade-off between Balancing Mechanism and wholesale revenue. This is because batteries normally pay to import energy in one market and sell it in another. However, a favorable wholesale price shape on September 10th meant batteries paid nearly nothing for importing wholesale power.
Batteries provided 1.9 GWh of upward flexibility while importing power at low cost
Wholesale prices dropped to zero both overnight and during the middle of the day on September 10th, with two price peaks offering batteries a good trading opportunity.
Between 10 a.m. and 3 p.m. wholesale power prices averaged £3.14/MWh. This allowed batteries to import wholesale energy at low cost to then sell when prices peaked in the evening. However, many batteries had imports reversed by Balancing Mechanism Offers.
This happened as wind generation was constrained in Scotland and energy was needed further south to balance this - wind generation averaged 11.5 GW across the middle of the day with transmission boundaries in Scotland highly constrained. 104 GWh of wind generation was curtailed across the period due to transmission constraints.
Batteries were dispatched for 1.9 GWh of Offer volume to help counteract some of this lost energy. These Offers allowed batteries to earn a spread on the difference between the wholesale price and Offer price.
These battery offers were the cheapest accepted across the period, offsetting the need for more expensive dispatches to CCGTs and other forms of generation.
Batteries were the cheapest source of Offer volume to balance wind curtailment in the Balancing Mechanism
Batteries primarily compete with CCGTs for dispatches in the Balancing Mechanism. However, the price these two technologies demand for Offers is determined by different factors. CCGTs prices are typically determined by their running costs, which are linked to gas and carbon prices. Battery prices are mostly set by the opportunity cost of discharging energy. That’s because if they discharge energy in the middle of the day, they won’t have any to sell in the evening peak.
On September 10th, the low power prices throughout the afternoon meant batteries could lower their Offer prices in the Balancing Mechanism. This meant they were the cheapest technology providing Offer volume, providing energy for £95/MWh on average between 10 a.m. and 5 p.m. As a result, battery Balancing Mechanism dispatches increased during this period.
Importantly, much of this Offer volume reversed planned charging actions. This meant batteries had to reschedule charging actions for the next available period to meet their planned evening discharges. However, for many batteries, these subsequent charges were also reversed, extending the duration these systems could provide Offer volume beyond their physical capacity.
Salisbury earned 2.5 times more revenue than the daily average on September 10th
The highest earning battery on September 10th was Salisbury (SSE, 50 MW, 100 MWh), which earned £609/MW, or an annualized £222k/MW/Year. It earned £500/MW from the Balancing Mechanism alone, and a large portion of this was earned between 10 a.m. and 3 p.m. During this period, the battery physically exported no power.
This was because this Offer volume came as a result of Salisbury’s wholesale imports being reversed. As a result, it’s net energy position was 0 MWh. Further charging actions were scheduled once the initial planned charge had been reversed, with these subsequently being reversed by Offers. This continued until 2pm, with Salisbury providing 2.5x more Offer volume than it could have physically provided by exporting power.
Importantly, Salisbury was one of the cheapest options available for Offers. These were priced below-average for batteries, and £20/MWh below the average CCGT Offer price.
Because of the relationship between the wholesale market and Balancing Mechanism in Great Britain, batteries being operated in this way can provide a system benefit even if they are not physically discharging any energy. They are buying energy on the wholesale market, providing liquidity within the day-ahead and intraday markets. The reversal of these charging actions through the Balancing mechanism then provides a net positive energy benefit to the system - that is cheaper than alternative actions.
This is one of the benefits Claire Dytka discussed in a recent transmission podcast episode.