Distribution Use of System (DUoS) charges can result in batteries either paying, or being paid for connection to the grid in different regions, similar to other network charges. Batteries could earn revenues from DUoS charges alone that are almost equal to those made in merchant markets - when connected at a low voltage in regions closer to demand.
But how are these charges calculated, where do they provide the most value, and how can batteries be dispatched to maximize DUoS revenues?
DUoS charges include a fixed capacity charge and variable energy charges
DUoS charges are paid by distribution-connected generators and demand sources to the Distribution Network Operator (DNO). They are designed to reclaim the costs associated with maintaining the network. Charges differ between the 14 DNO regions, but the calculation methodology remains the same.
The charges consist of three elements, which differ based on the asset type and connection voltage:
- A fixed standing charge - making up less than 1% of the total charge.
- A fixed capacity charge.
- Variable energy unit charges - split into separate import and export charges.
Energy charges are time-banded to be highest at times of high demand. Batteries pay to import, but are paid to export.
Batteries typically import during periods with low positive rates, and export during periods with high negative rates. This means that the total net energy charge results in a payment. Operators can export more energy during lucrative red-band periods to maximize this energy payment.
The total charge for a battery is determined by the balance between the fixed capacity charge and the energy export payment. For a high-voltage battery optimized without considering DUoS in the Midlands, these two charges almost cancel each other out, resulting in a net payment of only £700/MW/year.
Batteries pay, or get paid, more in regions where the balance between these charges is more unequal. In North Scotland, for example, a high capacity charge is not offset by the energy charge. This results in a net charge of £50k/MW/year. Battery operators here would need to consider DUoS charges in dispatch decisions to minimize this charge.
We have compiled these charges from all DNOs in a downloadable spreadsheet at the end of this article.
Battery operators can maximize DUoS value without sacrificing trading value
To maximize the value of DUoS, battery operators can consider DUoS rates in their dispatch decisions, shifting imports to green band times and exports to red band times. If optimized to maximize DUoS revenues, a two-hour battery connected at low voltage could generate up to £37k/MW/year in DUoS revenues alone in South East England.