September 2022 Leaderboard: understanding the benchmark

To go alongside the publication of our September 2022 Leaderboard, Robyn and Imrith discuss the market trends that have shaped this month's revenue benchmark. Plus subscribers can also dive deeper into these revenues on an asset-by-asset basis by reading our article ‘September 2022 Leaderboard: what Asset Success looked like’.

Fleet revenues

Figure 1 (below) shows the average fleet revenues for BESS assets in Great Britain (GB) from January 2020 to September 2022 (inclusive).

In September 2022, average earnings (£/MW) for battery energy storage system (BESS) assets decreased by 8.8% from the previous month - to an annualised revenue of £151,603/MW.

Dynamic services clearing prices

Figure 2 (below) shows the average clearing prices (volume-weighted) in the Dynamic Frequency Response suite services for September 2022.

• On average across the month, low-frequency Dynamic Containment cleared at £15.29/MW/h. This was the lowest since January 2022 - when the service cleared at an average of £14.41/MW/h.
• The average clearing price for providing Dynamic Containment symmetrically (at 90% rated power) was £18.35/MW/h in September 2022.
• High-frequency Dynamic Regulation prices crashed 81% from £20.02/MW/h (August 2022) to £3.80/MW/h. (Read more below.)

High-frequency Dynamic Regulation

Figure 3 (below) shows the average accepted bid price of participants in the high-frequency Dynamic Regulation service auction since its launch in April 2022.

• Since late August, the average accepted bid price has fallen to close to £0/MW/h.
• This differs from the market clearing price (which is the maximum accepted bid price) and is more reflective of the cost basis of providers.
• Low average bid prices suggest that the cost basis for delivery of high-frequency Dynamic Regulation is very low - in most cases, £0.
• This is due to the high import power associated with providing the service and the cost-recovery of this via Applicable Balancing Services Volume Data (ABSVD) payments. This provides a cost-effective way for BESS assets to charge up.

(You can read more about how prices in the high-frequency Dynamic Regulation service have fallen here.)

Firm Frequency Response

Figure 4 (below) shows bids accepted in Firm-Frequency-Response (FFR) for Leaderboard assets that delivered the service in September 2022 by EFA block.

• The number of Leaderboard assets providing FFR was sixteen in September, up two from the previous month.
• Prices in EFA blocks 1-4 (11pm-3pm) were significantly lower than in EFA blocks 5 and 6 (3pm - 11pm). On average they were £18.36/MW/h vs. £29.27/MW/h.
• FFR is a pay-as-bid auction, and there was a wide spread of accepted bids across EFA blocks. Accepted bids ranged from £11.72/MW/h to £35.00/MW/h.

BESS activity in the BM

In September 2022, Balancing Mechanism (BM) revenues made up just 1.98% of GB BESS revenues. Figure 5 (below) shows the daily BM revenues for all BMU-registered BESS assets.

Wholesale prices

The average daily spread available in September 2022 was £210/MWh. This indicated the potential revenue opportunity available in merchant markets. This opportunity is highlighted in Figure 6 (below), which shows the average daily spread available in Nordpool’s day-ahead hourly auction.

What influenced the Modo benchmark in September 2022?

The Modo benchmark for September 2022 was £11,510/MW for the month. Those assets making a higher return than this could be considered more successful than the average.

Figure 7 (below) shows a breakdown of annualised BESS fleet revenues for September 2022. Lower average clearing prices (£15.29/MW/h) and volumes procured (773 MW) in low-frequency Dynamic Containment compared to previous months meant the value of the key market for BESS revenues fell for the second consecutive month. The loss of value in low-frequency Dynamic Containment was partially accounted for by an uplift in monthly FFR and wholesale revenues which both increased from August 2022 by 5.67% and 110%, respectively. Wholesale revenues were largely provided by those assets taking advantage of the current high cost of energy and exporting in wholesale markets while providing high-frequency Dynamic Regulation.

September has been more lucrative than every month before January 2022, despite revenues falling 44.55% from the all-time highs seen in June 2022. This is great news for BESS owners and operators, especially considering one year ago (September 2021) we saw constant low-frequency Dynamic Containment clearing prices of £17/MW/h and lucrative spreads in wholesale markets of over £1,000/MWh for three consecutive days!