​Utility-scale battery energy storage systems in CAISO recorded their lowest-ever merchant revenues in the December 2025. The average grid-scale battery earned $1.2/kW from Ancillary Services and Energy arbitrage.

​Average revenues fell $0.76/kW (-39%) from November 2025’s $1.95/kW, which was itself the previous record low for the Modo Energy BESS CAISO index. Revenues declined $1.07/kW (-47%) year-over-year.

Winter is typically the lowest-earning season for CAISO’s battery fleet. California’s demand centers are located in regions of the state with mild winter weather. The absence of temperature-driven demand swings keeps Energy prices in a moderate range throughout the day.

That limits Energy arbitrage potential, which is the primary revenue stream for CAISO’s grid-scale batteries.

Read last month’s report here.

For any questions about CAISO research or benchmarking, reach out to logan@modoenergy.com.

Reduced dependence on natural gas decreased arbitrage opportunity by 33%

Grid-scale batteries in CAISO have earned 70% of their merchant revenues from arbitrage in the Integrated Forward Energy Market (IFM; CAISO’s day-ahead market) over the past two years. That reliance means nearly all revenue declines trace back to the IFM market. 96%, or $1.03/kW, of the total revenue decline is due to lower IFM revenues.

​IFM Energy arbitrage revenues fell by -60% because of a 33% decline in daily price spreads. The four-hour Top-Bottom (TB) price spread, a benchmark for arbitrage potential, fell from $3k/MW to $2k/MW (-33%).

Year-over-year declines in TB spreads have been the story in CAISO over the past several months (e.g. November, October, and September Benchmark Reports). Those reductions are largely explained by 2025’s less frequent and less intense weather events.

That’s not the case for the year-on-year reduction in BESS revenues for December 2025, though. Two weather events hit the state last month, and actually drove down battery revenues thanks to the impact on solar generation.

Fog and floods raised battery charging costs

For the first week of December, the Tule Fog reached Bakersfield and decreased Energy production from the neighboring solar sites. And in the last week, large rainstorms flooded much of the southern half of the state.

The net result?

Solar generation fell year-over-year despite 1GW of new nameplate capacity. Total generation ticked down 2% (2.69TWh → 2.64TWh), while the average daily peak decreased by 3% (12.31GW → 11.98GW).

Solar's large presence in CAISO's generation stack drives down midday Energy prices, frequently into negative or near-zero territory. That creates a wide gap between the prices batteries pay to charge and the revenues they earn when discharging during the evening peak. But when solar doesn't show up — as in December 2025 — that gap narrows, and arbitrage revenues shrink with it.

​Imports replaced natural gas generation

Typical discharging prices were 15% lower, too.

CAISO dispatched less natural gas in December 2025, in favor of more economic imports. Total generation by natural gas plants decreased from 5.75TWh in December 2024 to 4.33TWh one year later (-24.7%). With less generation and a flatter daily profile, gas plants were the marginal generator less often.

The shift in CAISO’s supply stack is visible in the generation distributions. Gas plants ran at lower output levels across the board: the entire distribution shifted left by roughly 2GW. Batteries filled part of that gap: BESS exports exceeded 3.5GW for 20% of hours in December 2025, compared to 12% of hours a year prior.

That increased presence in the supply stack is exactly why batteries ended up setting their own discharge prices.

​CAISO relied on lower-cost imports rather than dispatching higher-priced natural gas plants. The 1.2TWh increase in imports nearly offset the 1.4TWh decrease in gas generation.

Many of CAISO’s neighboring Balancing Area Authorities have substantial amounts of renewables (solar in Arizona and Nevada; large hydro in Washington and Oregon). Renewable generators typically offer their Energy for dispatch at substantially lower prices than thermal generators, reducing the likelihood these imports cause prices to spike in the same way thermal peakers do.

Revenues fell below zero during the Christmas storm

CAISO’s BESS fleet recorded its third-ever day of negative revenues on Christmas — with no gas peakers to set high discharge prices and no solar to carve out a midday price trough.

In the days leading up to the holiday, CAISO increasingly relied on BESS’s ability to immediately change its output. RTD Energy was the largest revenue contributor for one-third of the days in December, with those concentrated during low-solar periods.

Those same days are some of the lowest-revenue ones for the battery fleet: half of them recorded less than $30/MW-day. Total merchant revenues were this low during this period of the month because IFM Energy arbitrage was not contributing its typical amount to the revenue stack. Day-ahead revenues turned negative on four days in December.

This shows that solar and batteries’ symbiotic relationship can be a double-edged sword. Batteries can compensate for the lack of solar generation — in terms of providing grid stability and in bolstering their own revenue streams — but not enough to make up the gap completely.

​Battery revenues for December 2025 generally trended downward over the course of the month, tracking the decline in gas generation. This indicates that natural gas was displaced as the marginal generator by imports (and batteries, during peak periods) as the month wore on.

Despite extreme weather, energy scarcity never emerged

Weather events are a necessary but never sufficient condition for lucrative earnings periods for CAISO’s battery fleet.

After months of mild weather and steady battery revenues in California, a major shock did not yield extreme pricing. Only five days saw a TB4 spread in excess of $100/MW. In fact, two of the days with the most intense weather, December 23rd and 24th, yielded the two lowest TB4 Spread readings in CAISO’s history: $25.51/MW and $26.58/MW, respectively.

Load doesn’t spike during rainstorms, and although solar generation fell, inexpensive imports could fill the gap on those days.

​TB spreads dropped steadily in the middle of the month as natural gas left the supply stack and CAISO imported more renewables to compensate.

​During the height of the rainstorms and associated flooding — December 23rd and 24th — the typical price canyon nearly inverted. Midday prices exceeded those in the early-morning hours, and the evening peak price was just $10/MWh greater than the afternoon price - resulting in the two lowest TB4 price spreads.

The median TB4 value seen by CAISO’s batteries was $2.2k/MW

The median TB4 spread for batteries in SP15 and ZP26 landed at $2.2k/MW; higher than the maximal arbitrage opportunity of $2k/MW seen in NP15 (by MN8 Energy’s Mustang unit). This is the second consecutive month where ZP26 was not a clear outlier in terms of arbitrage opportunity, which had been a theme of 2025. For each of the three zones, the median TB4 in December 2025 was 30% lower than its November 2025 value.

Every battery site in CAISO saw less than $3k/MW in arbitrage opportunity, with a lone exception: San Diego Gas & Electric’s El Cajon site registered a TB4 of $7.5k/MW in December. El Cajon’s extreme arbitrage opportunity continues a long-running pattern of outlier behavior.