28 Sep 2021
Imrith Sangha

Modo Leaderboard Analysis Part Two: merchant opportunities

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.

With changes to ancillary services on the way - namely, the phase-out of Firm Frequency Response (FFR), the introduction of Dynamic Moderation (DM), and the potential market saturation of DC - we think that now is as good a time as any to reflect on how merchant market opportunities have affected the Modo Leaderboard previously, and to explore what the future might hold.

In Part Two of this article, we’ll look at merchant market opportunities, by examining:

  • Previous participation in merchant markets.
  • January 2021 case study: the benefits of a diverse market strategy.

(If you missed Part One, on the emergence of Dynamic Containment, make sure to check it out on the Insights section of our platform.)

Merchant market participation

Merchant markets can provide ample revenue opportunity for assets willing to diverge from a strictly frequency response market strategy. Since DC launched as a service, it has only been used for asymmetric low-frequency response, with providers required to be able to deliver their full contracted capacity at all times during the period they have successfully bid for. This means arbitrage positions are mostly not being taken up by BESS assets, as selling energy could compromise their DC delivery.

Assets willing to trade in merchant markets must withdraw from the service to gain higher capture prices in other markets. Figure 4 (below) shows monthly estimated merchant market revenues for all assets, categorised by site duration.

Figure 4 - All monthly merchant market revenues for BM-registered assets since January 2020.
  • As shown on the graph above, most monthly revenues in merchant markets for BESS assets are low. This is indicative of these markets being used primarily for state of charge (SoC) management, i.e. to recharge following energy losses (from providing DC).
  • In September 2020, three assets managed to achieve an estimated average of £7,268/MW in merchant markets. Subsequently, these were the top three performing assets on the leaderboard in that month (excluding EFR sites).
  • This was due to especially high revenues in the BM, which coincided with the final phase of the Reserve from Storage trial - where BESS sites were paid for their availability.
  • Factors such as non-physical trading and net-imbalance volume (NIV) chasing are not shown above. That said, when system prices are volatile, assets pursuing merchant strategies can find significant value trading in wholesale markets, as seen in January 2021.

So far, longer-duration BESS have not entered merchant markets frequently enough for us to draw any conclusions as to their ability to obtain greater revenues. This is due to there being a relatively small number of these sites. This is shown in Figure 5 (below), which shows the installed capacity of Leaderboard BESS assets by site duration.

Figure 5 - Installed capacity of Modo Leaderboard BESS assets by site duration.

To fully understand the opportunities for BESS in merchant markets, let’s look at January 2021 in more depth.

Case study: January 2021

The highest revenue month for any asset on the leaderboard happened in January 2021. During this month, the Brit-Ned interconnector outage occurred, causing wholesale prices to surge, with Intraday prices on the NordPool exchange exceeding £1,000/MWh.

January provided a prime example of how BESS assets can take advantage of volatility in merchant markets. (This is also something to look out for in our upcoming September Leaderboard, given that intraday prices cleared at £2,500/MWh on 14 September 2021.)

Figure 6 (below) shows the estimated annualised revenues for January 2021.

Figure 6 -All estimated revenues of assets from the January 2021 leaderboard. (Capacity Market revenues are excluded.)

Figure 7 (below) shows the estimated monthly revenue split of the top three performing assets against the average revenues of assets participating in DC for January 2021.

Figure 7 - Top three assets from January’s leaderboard, against the average revenue of assets participating in DC.
  • The graphs above highlight the potential for BESS assets to increase monthly revenues by withdrawing from ancillary services when merchant opportunities arise. This is evident from January’s top three.
  • The introduction of high-frequency DC and the upcoming saturation of frequency response markets means that making the most of merchant opportunities (when they arise) will become even more important.
  • The highest-earning asset for January 2021 achieved the highest monthly estimated revenue (per MW) of any individual asset since the Leaderboard started.


Merchant markets can be extremely beneficial for those assets willing to trade, if and when arbitrage opportunities arise. With wholesale prices surging this month, it will be interesting to see what our September Leaderboard looks like.

September’s Leaderboard should provide valuable insight into the future of BESS operation, showing the potential pros and cons of different market strategies for the first time since January 2021. We expect this to become a common theme on our Leaderboard, as markets increasingly shift towards closer to real-time procurement and optimisation strategies become more complex.

If you missed Part One, on the emergence of Dynamic Containment as the dominant revenue stream for BESS, head along to our Insights page.