The Modo Leaderboard started in January 2020. It began as a manual report that we e-mailed to users, and has grown into a complex benchmarking system that is a key feature of our growing platform.

Since the Leaderboard’s launch, we’ve seen battery energy storage systems (BESS) in Great Britain (GB) operated using different market strategies. We’ve also seen the emergence of Dynamic Containment (DC) as their primary revenue stream.

In Part One of this article, we’ll be looking at the emergence of DC, by examining:

• The story so far.
• Monthly revenue trends.

(In Part Two, we’ll be looking at how merchant market opportunities have affected BESS revenues, and what to look out for in future. You can check it out on the Insights section of our platform.)

The story so far

It is no secret that the £17/MW/h currently available in DC has provided a consistently high and stable revenue stream for BESS. However, before the launch of DC, what was happening? What were the differences in market strategy?

Figure 1 (below) shows daily primary market activity for all assets in the Modo Leaderboard between January 2020 and August 2021.

There’s a lot going on here, so let’s talk through it:

• The assets at the top of the graph are currently contracted to provide enhanced frequency response (EFR). This means they are unable to participate in other markets, but this will start to change next month as individual assets come to the end of their contracts (with all EFR contracts due to end by March 2022). This means that new capacity will be entering other markets.
• The empty spaces on the graph are indicative of assets not being energised, or being otherwise out of markets. (Visibility of market activity is based on publicly available data, such as ancillary service participation, bid-offer-acceptances in the Balancing Mechanism (BM), and the use of physical notifications alongside wholesale market prices.)
• Before October 2020, revenues were dominated mostly by monthly FFR, accounting for 49% of market revenues for BESS assets between Q1 and Q3 2020.
• Assets not participating in the service were largely providing weekly FFR, with specific individual assets pursuing a merchant strategy - however, this accounted for just 5% of all BESS revenues during this time period.
• The biggest takeaway from the graph above is the prevalence of DC. Though assets started participating in the market at different times (some on the first day of the service, one asset in particular finally joining on 31 August 2021), all non-EFR assets on our leaderboard had entered DC as of the end of August.
• The participation of assets in DC occurred in increments of time, predominately due to the high site requirements needed to provide the service.

Monthly revenue trends

So far, ancillary services have provided the primary revenue stream for BESS, but how has the transition from FFR to DC benefitted average market revenues?

Figure 2 (above) shows the average estimated monthly annualised revenues for BESS since January 2020. The summer of 2020 saw annualised revenues fall to as low as ~£50,000/MW/a (in July 2020). Since then, revenues have increased each month, leading to a peak of £127,500/MW/a (in July 2021). This is due to the larger proportion of assets continually participating in DC over this period, as explained in the previous section.

All of that said, there have been months where those willing to pursue a merchant strategy have reaped the benefits. This can be seen in the above graph, in both September 2020 and January 2021 - in these months, merchant markets proportionally contributed larger amounts to revenue streams. (We’ll come back to why this happened in Part Two.)

Figure 3 (below) shows the spread of estimated revenues for all assets in the leaderboard since January 2020.

• The average estimated monthly revenue of assets has trended upwards, with a smaller spread of revenues in 2021, compared with 2020. This is due to the emergence of DC as the dominant market for BESS.
• Any site not concentrated towards the top of the revenue spread has either been unable to enter DC for a significant period of time, or is otherwise contracted to deliver EFR.
• We saw peak estimated revenues in January 2021. This was due to wholesale price surges, which rewarded assets trading in merchant markets during this time period. (We have seen further wholesale price surges this month, and it will be interesting to note which assets have capitalised.)

Summary

In the last couple of years, ancillary services have been the lifeblood of BESS revenues. The introduction of DC has led to a fruitful period for those able to provide the service. Whilst BESS owners are currently enjoying high and steady revenue income streams through DC, they aren’t going to last forever.

To find out about how merchant market opportunities have affected our Leaderboard, and why they’re only going to become more prominent, check out Part Two of our Modo Leaderboard Analysis on our Insights page.