Modo Insights: August 2021 highlights

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Modo Energy

Modo Insights: August 2021 highlights

Last month at Modo, our team produced a number of in-depth reports and quick explainers to help you navigate the future energy system. These are essential reading (and viewing) for anybody looking to keep up with the latest unique insights into the world of energy. They are available in the Insights section of our platform. Here are a selection of Modo Insights highlights from August:

Choosing an optimiser: a two-part guide

Part One: introduction to optimisers

Modo’s Head of Research, Alex Done, produced this handy guide for energy storage owners attempting to choose an optimiser. In Part One, Alex provided an overview of what optimisers do. Using Gresham House as a case study, he explored the benefits of being able to split a large BESS portfolio across numerous third-party optimisers.

Gresham House BESS portfolio, split by optimisation solution.

“The size of Gresham House’s portfolio has allowed them to distribute sites across multiple optimisers. These include Habitat Energy, Arenko, EDF and Flexitricity.

This diversification reduces the risk of being tied into an agreement with a single, potentially underperforming optimiser.

Gresham House’s approach affords them a unique perspective on the optimiser market, with a hands-on understanding of the costs and benefits of each optimiser.”

Part Two: what to ask your optimiser

In Part Two, Alex looked at the dominance of Dynamic Containment in terms of BESS revenues. He then provided a series of questions that BESS owners should be asking during any tendering process.

The dominance of ancillary services in the revenues of the GB BESS fleet (based on 2021 earnings).

“Designing and implementing a strategy to maximise revenues is key to the role of an optimiser. But, as we’ve seen above, historical performance isn’t necessarily the best indicator of optimiser quality.

Instead, the following questions can help understand the exact nature of the optimisation:

How much experience of markets does the optimiser have outside of ancillary services?
Historically, ancillary services have been the dominant strategy for BESS revenues. However, market saturation will require diversification into new markets - most likely merchant markets. Understanding performance in these markets (even with different technology types) is a useful indicator of future success.

How much input from the owner is required in the monetisation strategy? There are many decisions to consider when designing a trading strategy: cycling rates, trading aggression, risk profile. You need to ask: how much involvement should an owner have in these decisions, and how often (and how clearly) are they communicated and reviewed?”

Part One is free to access here, whilst subscribers can check out Part Two on the Modo platform.

Modo video explainers

Hydrogen: blue vs. green - what’s the difference?

Modo’s Senior Writer, Neil Weaver, put together this short video explainer to guide viewers through the differences between blue and green hydrogen. It’s a controversial topic, and you’ll be hearing plenty more about it in the coming years. As an introduction to the key concepts, this is essential viewing.

UK ETS - inside the carbon market

In this video, Neil explains how UK carbon pricing works, and wonders whether this is the best system if the UK government is serious about meeting its net-zero targets. Find out how emissions allowances work, which industries they cover, and whether there is a viable alternative to the emissions trading scheme.

Keep your eyes peeled for more Modo videos, coming very soon.

Energy Digitalisation Strategy - what does it mean?

Neil also summarised BEIS and Ofgem’s Energy Digitalisation Strategy. Well-intentioned but ultimately very woolly, the plan nonetheless emphasises our belief that data and digital solutions will be vital bricks in the building of the future energy system.

“This Strategy and Action Plan is understandably vague. It recognises that energy data is too dispersed, or too hidden, or too low-quality for it to provide the value it should on our journey to net zero.

BEIS and Ofgem, alongside Innovate UK, have kickstarted a number of projects, reports, taskforces, etc., to combat these problems, but the reality is that they are still figuring out what they actually need to do. They understand the need for greater data transparency and exchange, and they understand that digitalisation is the best way to achieve those goals.

Crucially, they also understand that new regulations and better incentives will be needed to encourage innovation. They do not, however, know what this innovation will look like - yet. (Or, if they do, they haven’t made the specifics public.) Regardless, this recognition of the problems around energy data, and the attempts to build towards digital solutions, are undoubtedly steps in the right direction.”

You can read the entirety of Neil’s key takeaways from the report for free on our blog.