The GB BESS index increased 33% in April to £43k/MW/year, its highest level since October 2023. Revenues had previously increased to £32k/MW/year in March, after lows in January and February. With Capacity Market revenue included the index rises to £54k/MW/year in April.
We’ll be reporting on the GB BESS index, including Capacity Market revenue, from now on. The GB BESS Index on our platform now also includes Capacity Market by default.
Why have we made this change? Previously, we only reported revenues earned across shorter-term markets to represent value that’s exposed to changes in market conditions. However, with falling revenues the Capacity Market has now become a much larger part of a battery’s revenue stack. By including Capacity Market, we are now providing a complete picture of total battery revenues.
So, what caused the 33% increase in battery revenue in April?
- Great Britain broke the record for low carbon intensity twice in April, with the new record at 19gCO2/kWh.
- This was helped by high wind generation between April 6th and 16th, which caused 53 hours of negative power prices this month.
- This contributed to batteries increasing wholesale revenue by 8% to £16k/MW/year.
- Batteries were dispatched more than ever before in the Balancing Mechanism, resulting in a 50% increase in BM revenue.
- Frequency response revenue increased by 50% due to increased clearing prices in every service.
Negative prices got the headlines, it was the increase in frequency response prices, especially Dynamic Containment, that caused the biggest increases in revenues. Across Dynamic Containment, Dynamic Regulation, and Dynamic Moderation combined revenues increased by £8k/MW/year - 67% of the total increase in April.
Negative power prices cause wholesale spreads to rise
High wind generation in the first half of April caused day-ahead power prices to fall during periods of low demand, and sometimes turn negative. Power prices turned negative for 53 hours in April, a record for this time of year and almost half the total reached in 2023.
The fall in prices during certain times of the day caused wholesale spreads to increase by 25% in April, averaging £56/MWh across the month. Despite the large increase in spreads, wholesale revenue only increased 7% to £16k/MW/year.
Balancing Mechanism revenue increases by 50%
April saw record battery volume dispatched in the Balancing Mechanism, with 2.3 GWh of Bids and Offers dispatched each day on average. This represents a 32% increase from March. This increase tracks an increase in the in-merit dispatch rate for batteries, which averaged 11% in April.
Note: due to the change to the 30-minute rule in March, this figure is not directly comparable to dispatch rates from before the change.
The increase in dispatch volume contributed to a 50% increase in revenue from the Balancing Mechanism in April. This increase was helped by a rise in Bid-Offer price spreads.
Average accepted battery Bid prices fell from £34/MWh in March to £17/MWh in April. This allowed batteries to buy energy in the Balancing Mechanism at half the price they were paying in March. Average Offer prices fell by 7% to £84/MWh.
All frequency response clearing prices rise for the first time since June 2023
Dynamic Containment High and Low prices increased by 27% and 40%, respectively, in April, and batteries earned £17.5k/MW/year from the services combined. The largest proportional increases were found in Dynamic Regulation High (+51%) and Dynamic Moderation High (+86%).
The increases in price for high-frequency response services came during the period when power prices dropped. This was particularly evident between April 5th and 7th when day-ahead power prices fell negative for 27 hours. During this window, clearing prices of all high-frequency response services increased.
Frequency response revenues have made up a shrinking proportion of battery revenues. However, 2 GW of batteries remain contracted across the various dynamic services. That’s over half of Balancing Mechanism-registered battery capacity, so when prices do rise, it has a big impact on the GB BESS index.
The increase in frequency response prices reflects changes in value elsewhere
At the start of April, 45% of bids for Dynamic Containment High were above £1/MW/h. Between April 5th and 19th, wholesale power prices frequently fell below £10/MWh, and batteries increased their bid prices in response. Up to 73% of bids were above £1/MW/h in Dynamic Containment High in this period, pushing up prices for the service.
This increase was apparent in the other high markets too. This is reflective of the increase in the costs (actual and opportunity) of delivering these services when power prices fell. However, by the end of the month, bids for Dynamic Containment High were back to the pattern observed at the start of the month - as were prices for the service.
Essentially, frequency response prices are linked to the value available in other markets, alongside the costs of delivering the service. If other markets increase in value, or costs rise due to a change in power prices, we would expect to see frequency response prices rise as a result.
The increase in prices meant Dynamic Containment-focused strategies proved lucrative for one-hour batteries
One-hour batteries that earned a large proportion of their revenue in Dynamic Containment were some of the best-performing systems of that duration in April. This is in contrast to January and February. In these months the best-performing one-hour systems had a much lower focus on Dynamic Containment.
Breach Farm earned 82% of its monthly revenue from Dynamic Containment, and was among the top five best-performing one-hour batteries, earning £47k/MW/year, whilst averaging just one cycle per day.
This demonstrates the value of being agile in revenue strategy, especially during volatile market conditions. Battery optimizers that can forecast market changes and switch strategies are most able to maximize revenues.