Battery energy storage reaches new high in October!

Modo Energy, a British battery market analysis company, revealed that from September to October this year, UK battery energy storage wholesale transaction revenue increased by 45%, reaching the highest level since December 2022.

The latest research from the project platform shows that the growth in wholesale transaction revenue contributed 9.4% to the increase in battery revenue from September to October.

Overall, average monthly battery storage revenue increased by 22% from September to October, reaching £4.8k/MW. Prior to this, battery revenue increased by 19% in August-September.

Average revenue for batteries lasting less than 1.5 hours and more than 2.5 hours is £4.3k/MW and £6.2k/MW respectively.

Wendel Hortop, principal market analyst at Modo, added that this is equivalent to 57k/MW/year, and the 22% increase makes October the fourth highest revenue month so far this year.

The figures show another welcome increase in battery storage revenue, following a staggering 53% increase in June and July. Prices fell in August.

Hortop said trading spreads had risen by an average of 32% to £100/MWh before trading revenue increased, driven by continued high wind production in October. This is the second consecutive 32% increase.

Natural gas prices rose 17% month-on-month in October, which is one of the reasons for the increase in transaction spreads.

Windy October drives spreads widening

Monthly power statistics from National Grid ESO show that wind power made the largest contribution to the UK’s power structure in October, accounting for 33.7%, by natural gas, accounting for 27%.

Hortop said average wind power generation in October was 10.3GW, a 40% increase from September and the highest level since February.

According to Modo's research, periods of high wind power production occurred 14 times during periods of lower demand, causing prices to fall "significantly" to double September's levels. These drops increased the spread in October, which averaged £123/MWh over the 14-day period compared with £82/MWh on a "regular" day.

Dynamic limits and dynamic adjustment prices continue to rise

Modo Energy attributes the 7.8% increase in battery revenue in October to higher dynamic limits and dynamic adjustment prices.

After the dynamic price of batteries hit a record low in August (the average dynamic low price of batteries was 1.49 pounds/MWh, and the average dynamic high price of batteries was 2.9 pounds/MWh), the dynamic prices of batteries have increased for the second consecutive month.

Wholesale transaction prices in October pushed dynamic limit prices up by 20% and dynamic adjustment prices by 60%, "due to a fundamental shift in ESO's view of this service."

Here, Hortop refers to the monthly Frequency Response Market Information Report released by State Grid ESO starting in September, in which ESO increased dynamic adjustment requirements and set a price cap for the service.

The 60% increase brought the dynamic adjustment price to the highest level since November 2022.

Entering November, will battery revenue continue to grow?

According to Hortop, the "persistent bidding feature" launched on November 2 will allow participants to bid simultaneously and provide multiple frequency response services, as well as split assets between different services and submit negative bids.

While improving the efficiency with which European grid companies procure frequency response services, the new structure is expected to lead to lower settlement prices, with negative bidding further driving down prices.

"If this pricing trend continues, operators will hope to further increase transaction revenue to offset the decline in frequency response services."

LCP Delta issued a report in early September warning of the risks of over-reliance on frequency response markets. The frequency response market no longer delivers historically high returns for battery assets.

Instead, the energy analytics and advisory firm recommends more "sophisticated" strategies for battery storage assets to increase revenue, such as generating revenue from wholesale and balancing markets, which would be more profitable for battery storage investors. Choose, or adopt higher risk options such as net imbalance.