Forecasting a standalone battery asset’s revenue streams

Case studies

How we helped an industrial client assess the value of installing a battery energy storage system at one of its sites taking account of on-site solar generation and demand.

The background

We had been commissioned to provide battery asset forecasts for multiple client projects, including transaction due diligence and in-house strategic analysis. These include forecasts of wholesale and balancing margins, ancillary service revenues, operating profiles and other embedded costs or benefits across a range of market scenarios.

Our solution 

Using either in-house assumptions or those agreed with the client, we used LCP’s EnVision to model the future capacity mix of the system under different scenarios and the revenue streams of battery assets under each of these scenarios. The revenue modelling used our stochastic dispatch model to understand the range of revenue streams for the units within each scenario.

The modelling employs a fundamentals driven approach to consider the actions of each unit in each individual period, in both the wholesale and balancing markets. Storage actions are optimised to maximise their profit against these price signals, subject to the unit’s operating constraints and considerations such as imperfect price foresight. This modelling accounts for the impact of a variety of market factors, such as competition from other battery and flexible technology build-out, commodity prices and renewable penetration, as well as the intrinsic technical capabilities of the asset such as duration, efficiency and degradation rates.

As well as wholesale and balancing revenue streams, we provided forecasts for ancillary service revenue from Dynamic Containment and other frequency response products. Our modelling also provided forecasts for locational charges and benefits (such as TNUoS, GDUoS & Triad), and Capacity Market payments (clearing prices and derating factors). In the long term, we anticipate that sufficient levels of competition will mean these revenue streams will be valued based on the opportunity cost of forgoing energy market revenues, subject to any costs in providing the services and benefits from lower levels of degradation in the unit.

Finally, we worked with the client to help them understand the impact of battery degradation and determining operational strategies to resolve the trade-off between higher cycles and revenues and delayed investment for repowering. 

The outcome

The results from our forecasts have been used by the client in Great Britain to inform decisions around battery asset investment, including determining the appropriate specification (such as size and duration) of the asset, and an operational strategy to maximise the revenues achievable.

How we can help

We can help our clients with a wide range of issues from whole system modelling to individual power plant and policy impact analysis.

Strategic advice aimed at maximising the benefits and minimising the risks associated with the Capacity Market and Contracts for Difference.

We advise on the optimal dispatch of assets within the wholesale market, forward planning of maintenance activities and valuation of commercial upgrades to plant.

We provide detailed forecasts of the GB and Irish power markets, using our EnVision modelling framework. This can provide both short-term and long-term forecasts of all key system metrics, from system wide to individual assets.

We work extensively in the Irish market, providing market modelling and analysis to investors, generation owners and governments.

Enact is an advanced data integration and analytics platform for the GB electricity short-term markets, allowing power traders to make more informed decisions and analysts to benchmark their asset's performance.

Our understanding of market dynamics and modelling experience allow us to offer evidence-based recommendations on complex policy and regulatory issues that allow fully informed decision-making.

We combine bottom-up unit-level modelling with market and policy insights to quantify the value and understand the risk associated with any generation asset. 

Get in touch.

If you would like to know more about our services and how we can help you with Energy analytics.

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