Version 3.2 of the Modo Energy Battery Revenue forecast for Great Britain has just been released. This update introduces advanced demand modeling for electric vehicles and heat pumps. Changes to Capacity Market de-rating factors and Balancing Mechanism dispatch rates have also been included, as well as the quarterly update to commodity prices.
We held a livestream on Tuesday 15th October to cover these changes in more detail. The slides are available for download here and we have answered your questions in the forecast documentation here.
Modelling changes
Power demand in Great Britain has been falling over time due to declining industry and increasing energy efficiency. However, we forecast that the electrification of transportation and domestic heating will change this, with demand rising 72% by 2035.
We’ve introduced new demand modeling to capture the impact this will have on the power price and the spreads available to BESS.
Optimized electric vehicles increase overnight prices and compete with BESS in the peak
We project that by 2035, 18 million electric vehicles will account for 15% of total overnight power demand. Our updated model accounts for commuting patterns, weather impacts, and relevant energy tariffs to give a granular view of EV charging demand.
Currently, most EV charging is unoptimized, meaning that power demand peaks when cars are plugged in to charge in the evening. By 2030, 40% of vehicles will be able to smart charge, utilizing cheap power to charge overnight. This extra demand will double the average overnight price.
Around 20% of vehicles will also feature vehicle-to-grid technology, allowing them to discharge into the grid during the evening peak and compete with grid-scale BESS. However, the remaining 20% of unoptimized vehicles offset most of the price impact here.
Heat pump demand driven by real-time weather conditions
By 2035, we project that 16% of households will be heated with heat pumps, up from less than 1% today. Heat pump demand will be responsible for 20% of total demand during winter peaks.
Real-time weather conditions drive heat pump demand in our updated model, meaning that the wind that chills homes and drives heat demand also spins the turbines that supply the power.
Other changes
- Ramp rates for batteries above 300MW: Batteries above 300 MW face ramp rate restrictions that limit their trading flexibility. We’ve updated our model to maximize revenue around these restrictions - which we’ve previously explored here.
- Updates to carbon capture and storage (CCS) subsidies: we’ve updated subsidy assumptions in the investment calculations for gas CCGTs with CCS.
Short-term outlook
Gas prices increase by 12% in 2025
Future expectations of gas prices have increased since the previous version due to growing geopolitical instability in the Middle East. These expectations form the basis of near-term gas prices in the model. Gas prices for 2024 and 2025 are 12% higher than in V3.1 and an average of 3% higher up to 2028.
Carbon prices have also increased slightly and are 3% higher in 2025 than in the previous version.
In isolation, these increases in gas and carbon prices also increase price spreads by 7% in 2024 and 2025. This impact reduces in the following years.
Delayed rollout of the Open Balancing Platform reduces Balancing Mechanism dispatch rates
We project a short-term increase in Balancing Mechanism dispatch rates as NESO rolls out the Open Balancing Platform (OBP) scheme of works to improve its infrastructure and better utilize batteries.
However, in September, NESO updated the rollout to push back the launch of ‘new energy storage parameters’ by six months. This improvement will give the control room visibility of battery state of charge - replacing the 30-minute rule and enabling longer dispatches. We have updated our improvement timeline to reflect this.
We’ve also updated the improvement timelines for system action dispatch rates. Energy actions have seen more significant improvements than system actions. Skip rates for energy actions have decreased from 90% to 76%. Skip rates for system actions have reduced from almost 98% to just 90%. Because of this slow progress, we now project that we won’t see fully efficient system-flagged actions until 2028, rather than 2027 previously.
Revenues to increase 15% by 2027
Revenues are projected to increase to around £95k/MW/year for a two-hour, two-cycle battery out to 2027.
Despite a slower rollout of the Open Balancing Platform, the Balancing Mechanism drives most of this change, increasing from 16% of the stack in 2024 to 34% by 2030 in unconstrained regions. Wholesale revenues decrease by 25% as electric vehicle charging compresses spreads.
We’ve updated Capacity Market de-rating factors, leading to higher revenues in 2026 compared to the previous version.
Long-term outlook
Reduced wind buildout pushes up CCS capacity
In the short term, wind buildout has been updated with the latest commissioning dates of known projects. Many of these have been delayed by a year or more compared to projections in V3.1.
Long-term wind buildout has also been updated, using projects with known contracts for difference from allocation round 6 (AR6) or renewable obligation subsidies.
This decrease in wind capacity increases price spreads and incentivizes the buildout of gas CCGTs with carbon capture and storage (CCS). Compared to the previous version, an additional 16 GW of CCS comes online by 2050.
Updated fleet optimization slows BESS buildout from 2040
As the total installed BESS capacity exceeds 20GW, price spread cannibalization has more of an impact on battery revenues. In version 3.2, we’ve updated the modeling of battery fleet revenues to better account for this cannibalization.
This slows buildout beyond 2040, with 6 GW less capacity online in 2050 compared to the previous version.
Falling Capacity Market de-rating factors lower contract value
In the short term, capacity market de-rating factors have been updated to correspond with the latest methodology.
From 2028, NESO’s new de-rating factor methodology has been implemented, increasing the de-rating factor in the years 2028 to 2029. A 1-hour battery would see an uplift from 8.4% to 10.3%.
However, Capacity Market de-rating factors fall over time as potential loss-of-load events become longer and energy-limited assets become less valuable to the system.
Lifetime revenues fall by 2%
For a two-hour, two-cycle battery in the East Midlands, the present value of lifetime revenues is 2% lower in version 3.2 compared to version 3.1. Revenues decrease by an average of 5% up to 2035, driven by lower spreads from overnight electric vehicle charging.
From 2035 to 2050, revenues increase by an average of 8% as gas CCGTs replace some wind buildout from the previous model version, increasing the daily price spread.