Throughout September, we looked into future buildout, co-located battery energy storage, the revenue impact of big batteries, and the business case for long-duration BESS. We also analyzed how the Balancing Mechanism contributed to the highest daily revenue since October 2023. As well as reflecting on skip rate performance in 2024 and other key battery trends from the year.
A quick summary of the key findings from September’s research is given below.
September summary
- Balancing Mechanism revenues were a key contributor to September’s highest daily BESS revenue since October 2023.
- Despite having the highest daily revenue in almost a year, September was the fourth-highest revenue month of 2024 so far.
- Skip rates for energy actions in the Balancing Mechanism improved from 90% in 2023 to 76% in August 2024, though system-flagged actions lagged behind.
- NESO’s Q3 Balancing Programme webinar highlighted upcoming updates to constraint management and battery dispatch optimization.
- By 2030, falling battery Capex is expected to make batteries more cost-effective than pumped storage hydro for durations up to 10 hours.
- We could see our first 300 MW battery as soon as next year. Large batteries above 300 MW face ramp rate restrictions that limit trading flexibility, but can mostly offset this by trading less frequently with longer dispatches.
- Looking at existing batteries in Great Britain, degradation averaged 4% after 365 cycles, with some systems degrading up to 11%.
- In CfD AR6, 1.4 GW of battery energy storage is planned to be co-located with renewables projects that secured contracts. This is the largest capacity yet.
- Throughout 2024 we have seen a stronger link between BESS revenues and wind generation. The occurrence of negative power prices are increasing due to subsidized renewable generation, with projected growth to 1,000 hours of negative pricing by 2027.
Balancing Mechanism revenues a key contributor to September’s highest daily BESS revenue since October 2023
On Tuesday 10th September, batteries earned £97k/MW/year. This was the highest revenue in a single day since October 2023. Like throughout much of August, this was helped by increased Balancing Mechanism revenue. Batteries earned £38k/MW/year on the day due to Offer dispatches.
Low wholesale power prices meant batteries looked to import power during low-demand periods. However, these dispatches were reversed by Balancing Mechanism dispatches, with this upward flexibility balancing high wind curtailment in Scotland. Batteries provided 1.9 GWh of Offer volume during the middle of the day. They earned revenue on the spread between the wholesale import cost, and the Offer price.
Read the full article to find out how this helped one battery earn 2.5 times more than the average across the fleet, here.
Capex reductions boosts battery buildout over the next 15 years
As part of the GB BESS outlook for Q3 2024, in September we looked at the evolving investment case for batteries of different durations, as well as the practical limitations on buildout rates.
The investment outlook for new-build batteries changes from 2028 onwards. This follows a 5x increase in the installed capacity of two-hour batteries, combined with reductions in Capex.
We project that reductions in Capex will be steepest for longer-duration batteries. A higher proportion of their costs come from cells, where prices fall the quickest.
As renewable capacity increases over the next three years, there will be more opportunities for trading between days, where longer-duration batteries have an advantage. This boosts the business case for long duration storage, which we see built out at a rate of 3 GW per year out to 2040.
Find out more about how falling Capex for longer-duration batteries improves the investment outlook for batteries beyond four hours relative to two-hour batteries here.
(The v3.2 update of the GB Forecast will be out in October 2024. This will see changes to the long-term buildout.)
Will BESS beat other types of long-duration technology?
In addition to analyzing the effect of reduced capex on buildout, in September we also did a more in-depth analysis on the impact on long-duration storage.
Long-duration storage is defined as 6 hours or greater, according to the Department for Energy Security and Net Zero - an area currently dominated by pumped storage hydro. However, with falling Capex costs for battery energy storage systems, we project a large increase in batteries with 6-8 hours of capacity.
Capex costs for BESS scale much more with duration than for pumped storage. Longer-duration projects require more cells, which are the major Capex component. This means that pumped storage hydro is currently cheaper to build for durations above 6 hours.
However, falling cell costs could change this. By 2030, we project that batteries will be cheaper for durations up to around 10 hours.
Read the full article to find out why we expect an increased buildout of batteries up to 8 hours in duration here.
How do revenues compare for batteries above 300 MW?
As well as looking into the business case for long duration storage, we looked at the revenue impact of big batteries. That is batteries with a rated power of 300 MW and above.
The first batteries with a rated power above 300 MW could come online next year, with systems of up to 1GW online by 2027. These batteries face ramp rate restrictions that could mean they see lower wholesale revenues per MW.
Ramp restrictions helps to ensure grid stability, but limits the amount of energy that batteries can trade - particularly over shorter dispatches. However, larger batteries can minimize this revenue impact by performing more infrequent but longer trades.
September’s analysis found that because of this, a 1 GW battery might only earn 3% lower wholesale trading revenue than a 300 MW system per MW.
To find out more about how large batteries could have market-moving effects on power prices and be dispatched differently in the Balancing Mechanism, read the full article here.
Skip rates: How have these improved for BESS in 2024?
Skip rates for batteries in the Balancing Mechanism have improved in 2024, but not for all types of actions. Energy actions improved from 90% at the end of 2023 to 76% in August. However, improvements to skip rates for system-flagged actions have lagged behind, opening up an 18% gap.
Constraint actions are not currently dispatched via the Open Balancing Platform, and therefore, these actions are not instructed via Bulk Dispatch. Instead, these actions still rely on legacy, manual processes for dispatch.
Read the full article to see how skip rates varied for individual batteries here.
September webinar: Key changes for BESS in the Balancing Programme from Q3 2024
On Thursday, September 26th, NESO held its quarterly Balancing Programme update. The webinar included a recap of changes and improvements made to the Balancing Programme from June to August.
August saw the highest battery volume instructed through OBP and the highest battery volume ever recorded. In August, the control room dispatched 81 GWh of battery volume, with 73 GWh actioned through the OBP.
To find out about other improvements to the Balancing Programme including updates to constraint management, battery dispatch and the move towards a national optimizer, check out the full article.
Degradation: The impact on battery energy storage in 2024
We are often asked about how degradation is effecting existing batteries. There is currently no publicly available degradation data for batteries in Great Britain. Therefore we analyzed metered generation data to estimate how much energy capacity batteries have lost over time.
From this data, batteries have degraded an estimated 4% on average after 365 cycles.
In general, batteries are degrading in line with industry expectations. With more cycling comes more degradation. However some batteries have degraded slightly faster, up to 11% after 365 cycles and some slower.
Factors like cycling rate, average depth of discharge, and discharge power can all impact degradation rates.
With batteries cycling and discharging more than ever, read the full article to find out how far these factors are impacting degradation here.
Battery co-location reaches 1.4 GW high in latest CfD allocation round in September
In CfD AR6, 9.6 GW of renewable projects won contracts, including capacity from some projects that had won contracts in previous allocation rounds. Batteries cannot take part in the CfD directly. However, we estimate that 1.4 GW of battery energy storage is planned to be co-located with renewables projects that won contracts.
Following a record-breaking 3.3 GW of solar contracts being won, 1 GW of battery storage could be co-located with some of these projects. The remaining 400 MW is expected to be co-located with wind.
The full article includes details on which owners won contracts and which sites are planning to co-locate. Modo subscribers can also download the co-located battery database. This can all be found here.
Why do negative prices happen and why will they continue to grow?
There have been over 150 hours of negative pricing in Great Britain so far in 2024. This follows 107 hours in 2023, and just 29 in 2022. We project this growth to continue through to 2027, when we could see 1,000 hours of negative pricing.
This increase is driven by growth in subsidized, price-insensitive generation capacity. 80% of renewable capacity operating today does not have an incentive to turn off at £0/MWh.
The total capacity of these generators is expected to keep growing until 2027 - meaning the amount of negative-priced periods will also keep growing until then. After this point, a combination of nuclear retirement, expiring subsidies, and demand growth reverses this trend.
The full article explains more about negative prices, including the growing role of interconnectors and can be found here.
And finally - BESS in Great Britain: Ten key trends in 2024
The annual Solar & Storage Live exhibition took place at the end of September. Our Markets Lead, Wendel, presented the ten key trends for battery energy storage systems in Great Britain so far in 2024.
During his presentation, Wendel discusses key trends such as:
- Capex reductions and the impact on the battery investment case
- Battery buildout and the big batteries coming soon
- Changing revenue strategies and they link to wind generation
- And many more
In case you missed it you can find the full presentation in article form on our platform.
On the Podcast, Sarah Honan discusses locational pricing and decentralized energy
Topics on Transmission this month ranged from assessing how the energy transition impacts batteries in the Capacity Market and the debate on zonal vs national pricing. We also looked into addressing the energy talent gap and overview of natural gas and its relationship with power prices.
Sarah Honan, Head of Policy at the Association for Decentralised Energy joined Ed Porter to discuss the debate on zonal pricing vs. national pricing and key features of successful demand flexibility implementation.
Further topics discussed in September:
- Lisa Waters, Founding Director of Waters Wye Associates on how batteries can be leveraged for greater impact in the Capacity Market. As well as the regulatory changes needed for better market integration, and the intricate process of implementing regulatory updates in the UK.
- Seb Kennedy, Founding Editor of Energy Flux, unpacks the complexities of natural gas, the global gas markets, and gas's evolving role as we work towards decarbonizing our energy supply.
- David Hunt, CEO at Hyperion Executive Search discusses the talent gap in the renewable energy industry. Including key focus areas for the energy industry over the next decade.