Modo Energy's July 2026 GB forecast release models non-physical trades between day-ahead, intraday and the Balancing Mechanism (BM) more accurately, and that change is the single largest driver of higher BESS revenue in this release.

A separate, more conservative view on carbon capture and storage (CCS) build-out adds more open cycle gas turbines (OCGTs) to the generation mix instead, widening daily price spreads and supporting a bigger battery fleet. On fundamentals alone, that bigger fleet means more competition and pulls BM revenue down, but the non-physical trading change more than offsets it.

Key takeaways

• Higher volumes of non-physical trading are the single largest driver of the revenue increase in this release, ahead of the OCGT and price-spread effects below.
• Open cycle gas turbines (OCGTs) replace carbon capture and storage (CCS) as the marginal flexible plant in Modo Energy's capacity expansion logic, widening daily price spreads and creating more revenue opportunities for BESS.
• A larger forecast battery build-out increases competition. Balancing Mechanism (BM) bid and offer dispatch rates fall by around 8-9% on average across 2030-2039, as a result.
• Gas and carbon prices are updated and BESS revenue curves are recalibrated to the Modo Energy GB indices.
• Longer-duration assets gain the most. An 8h asset's average revenue rises from £173k to £192k/MW/year (+11.2%) over the full horizon, against £54.5k to £58.7k/MW/year (+7.8%) for a 1h asset.

More non-physical trading lifts merchant revenues by 8 to 10% in the July forecast

The July 2026 release assumes more volumes of non-physical trading, which pushes up revenues in intraday and balancing markets.

As a result, merchant revenues are up between 8% and 10% from the April release. This is the single largest driver of change in this release, ahead of the OCGT and price-spread effects below.

Previously, Modo Energy's GB dispatch model assumed efficiency losses on non-physical trades between day-ahead, intraday and the BM. This meant a larger spread was required between these markets for a buy (or sell) order to be reversed in a subsequent market (ie day-ahead to intraday, or intraday to BM).

The July 2026 release models these trades without that efficiency loss as the battery does not actually cycle, and volumes increase. This also aligns with seeing higher levels of non-physical trading occurring in the market.

The impact of this on half-hourly dispatch can be seen below.

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OCGTs replace CCS as the marginal flexible plant, widening daily forecast price spreads

In practice, scaling carbon capture and storage (CCS) remains technically challenging and expensive. Recent political rhetoric implies CCS subsidy money could be diverted to defense. Thus the July 2026 release takes a slightly more conservative view on CCS build-out.

Consequently, the capacity expansion logic now brings forward more OCGT capacity instead. OCGTs have a higher short-run marginal cost (SRMC) than the CCS plant they replace, as they are both more inefficient and subject to a carbon price.

This raises average daily maximum prices. It also widens daily price spreads, the gap between the cheapest and most expensive hours of the day.

Wider spreads support a larger battery build-out, but BM dispatch rates fall as competition increases

Wider daily spreads create more arbitrage opportunity for BESS. This supports a larger forecast battery build-out than the April 2026 release assumed, reaching around 36 GW by 2035, up from 29 GW.

However, a larger fleet means more batteries competing for the same market volumes. BM bid/offer dispatch rates are suppressed vs April 2026, as are daily spreads in wholesale markets throughout the 2030s. BM offer rates fall by around 8.7% and bid rates by around 8.3% on average across 2030-2039, as a result.

Spreads widen again in the 2040s and 2050s. Greater OCGT build-out and less CCS means carbon costs apply to more price-setting generation over that period, supporting higher power prices and wider spreads.

Forecast gas and carbon prices are updated and revenues are recalibrated to the ME GB indices

The July 2026 release updates gas and carbon price assumptions and recalibrates the model against the Modo Energy GB indices. This changes the relative cost of running each type of thermal plant across the forecast horizon, feeding directly into the price spreads driving BESS revenue.

National average revenues rise across every duration, with longer-duration assets gaining most

Combining the OCGT-driven spread widening, the updated gas and carbon prices and the more accurate non-physical trade modelling, national average revenues excluding CM rise across every duration. Longer-duration assets see the largest gains. An 8h asset's average revenue rises from £173k to £192k/MW/year (+11.2%) over the full horizon, against a rise from £54.5k to £58.7k/MW/year (+7.8%) for a 1h asset.

National average revenues excluding CM, 2 cycles/day, rise against the April 2026 release across every duration:

The July 2026 forecast tracks above realised BESS performance

Against realised performance, the July 2026 forecast tracks above the P75 of the Modo index 2h benchmark over the six months where both overlap, in a market that has itself been volatile month to month. That result supports the higher revenue outlook set out in the bottom line below.

The bottom line for GB BESS in the July 2026 release

Wider spreads from a more conservative CCS build-out outweigh the extra competition from a bigger battery fleet, at least over the first 15 years. Longer-duration assets capture the most upside, as they are better placed to arbitrage the widening spreads of the 2040s and 2050s once near-term competition eases.

BM dispatch rates absorb most of the near-term competition, falling by around 8-9% through the 2030s as the fleet grows. That is the cost of a bigger fleet; wider spreads and the non-physical trade gains more than offset it in net revenue terms.

Non-physical trading volumes are assumed higher in this release, in line with what Modo Energy observes in the market, and that assumption alone drives revenues up between 8% and 10%, ahead of the fundamentals above. The wider system is shifting toward more dependence on peaking, unabated gas plant and clean flexibility from a larger BESS fleet, with commodity curves higher in the near term.