Thanks to everybody who attended our first Modo Live event: understanding frequency response in GB. We explained what’s been happening since the launch of Dynamic Regulation. We’ve already had loads of requests for the slides from Imrith and Neil’s presentation, so you can find all of those in this article. If you missed the event, or just want to watch it again, check out the video below:
Background - what’s going on in frequency response?
In the slides below, you can see why frequency response is so important for battery energy storage systems in GB. You can also see a forward view of National Grid ESO’s plans for the transition away from firm frequency response (FFR) into its new Dynamic suite, including Dynamic Regulation.
- Since January 2020, frequency response services have accounted for nearly 94% of battery energy storage revenues in Great Britain.
- In February 2022, BESS hit new all-time high revenues, with an average of £151k/MW (annualised).
- FFR is being gradually phased out between now and this time next year.
- We can also see where the new pair of Dynamic services - Regulation and Moderation - come in. Dynamic Regulation launched earlier this month, and we’ll dive into that in more detail shortly. Then, the first DM auction is happening on May 6th. In around October, we’ll see the ESO expand those services while it starts to shrink its FFR volumes.
What’s been happening in Dynamic Regulation?
The following slides give an overview of the first fortnight of the new Dynamic Regulation (DR) service. We look at volumes procured, revenues, technical challenges of delivering the service, and a side-by-side comparison with Dynamic Containment (DC).
- On average, around 29 MW has been procured in each EFA block in the high-frequency service, and just over 12 MW in the low.
- Compared to DC, these are much smaller volumes. During the same timeframe, the ESO procured 557 MW in the low-frequency DC service and 447 MW in the high-frequency service.
- When we look at the raw clearing prices alone, Dynamic Regulation values are higher.
- In this graph, we can see how much the ESO has spent on these two services in the first two weeks since the Dynamic Regulation launch.
- The ESO has spent ~7.5x more on DC than DR. This means that DC can accommodate more capacity and more assets, which makes sense given the higher procurement targets for the service.
Dynamic Regulation - State of Charge requirements and cycling rates
At a very high level, State of Charge rules determine the eligible capacity assets can provide frequency response at, so that participants won’t be in breach of their commitments to provide a given service at any time during their contracted period.
For DR, there are much stricter State of Charge requirements compared to DC. This comes down to the fact that the response time DR is one hour, and in DC it’s only 15 minutes. Because of the stricter State of Charge requirements, assets needs de-rate their capacity more when bidding for contracts in DR compared to DC, especially when they provide a service symmetrically.
- As DR has stricter state-of-energy requirements, there is a much higher de-rating factor, which leads to a bigger reduction in the clearing prices accessible to assets in the service.
Cycling rates are important because batteries will want to keep within warranty limits and not degrade their systems too much. They matter because batteries may want to further de-rate their capacity to only cycle a certain amount of times per day.
- As we can see, DC requires far less cycles than DR.
- If assets were to further de-rate their capacity to 1.2 cycles/day - which is just over one full charge/discharge and matches providing FFR services - then we can see a better comparison of DR and DC prices.
There are days when there is far more value in DC and there have been a few days when the ESO hasn’t procured any DR - so the ability to forecast these price spikes and jump between markets will be super important and lucrative moving forward.
April’s Leaderboard - a sneak peak
- So here we have most of the assets from April’s Leaderboard organised from left to right in total revenues from frequency response services, excluding EFR sites.
- The first thing to note is the top three assets have all been involved quite heavily in DR, and this obviously fits in with what we’ve just discussed regarding the higher value currently available in the service compared to DC.
- On average assets are earning £9,000/MW.
- Finally, one of the largest changes in trends - especially compared to earlier months in the year - is that FFR is less lucrative than it has been.