What are the revenue models and trading markets for battery systems?
To answer the question of what the revenue models are for batteries in the balancing markets, it is important to know which markets exist and what these markets entail. Below, we explain what the balancing markets are and how you can deploy a battery on them.
Energy trading markets for a battery
Energy trading markets are, as the name suggests, markets where electricity and other energy sources are traded. The trading markets ensure that electricity is distributed as efficiently as possible. There are several types of energy trading markets; we highlight a few below.
FCR – Frequency Containment Reserves
A battery can be deployed on the FCR market to stabilize the frequency of the electricity grid. In this case, the battery must be equipped with a frequency meter. When the frequency drops, the battery will start supplying power. When the frequency rises because there is more power on the grid than needed, the battery will absorb power to correct this.
Power can be offered on the FCR market every day in blocks of 4 hours. You will receive a fee for making this power available.
aFRR – automated Frequency Restoration Reserves
The aFFR market is focused on restoring the frequency of the electricity grid after a disruption. Automatically controlled reserves are used to restore the balance within a few minutes.
Where the battery continuously monitors the frequency of the grid in the FCR, the battery in the aFFR is called upon based on the price bid submitted before 9 a.m. the previous day. In the aFFR market, you receive a fee for making the capacity available and a fee when the battery is deployed.
Day-Ahead
The name says it all; on the Day-Ahead market, trading takes place one day in advance. The BRPs must submit, no later than 12:00 noon one day in advance, for each hour, how much energy will be supplied and consumed. Prices are determined by the balance of supply and demand.
For a battery, for example, a bid can be submitted for charging during the 3 cheapest hours and discharging during the 3 most expensive hours. As a result, it is always clear one day in advance what will be earned with the battery.
Intraday
Here too, the name says what kind of market it is; energy trading takes place on the day itself. BRPs can trade from 3:00 p.m. one day in advance until no later than 5 minutes before delivery. This allows adjustments to be made based on real-time supply and demand and unexpected events.
Where the final price on the Day-Ahead market is the same for everyone, the price on the Intraday market varies depending on when the deal is closed. The spreads on the Intraday market are often also a lot higher than on the Day-Ahead market, which means that higher earnings can be achieved with a battery.
Imbalance market
The imbalance market is an essential part of the electricity grid, where the balance between supply and demand is maintained in real-time. When the actual electricity demand deviates from the predicted demand, an imbalance arises that needs to be corrected.
With a battery, the greatest profit can currently be made on the imbalance market, mainly due to the growing influence of sustainable energy sources such as solar and wind energy. As a result, price differences in the imbalance market have increased significantly in recent years.
Correct configuration and control
In order to actually generate revenue with a battery on one of the previously discussed trading markets, it is crucial to choose a battery with the correct configuration. In addition, it is essential that the battery is easily controllable and effectively controlled. The control of a battery on the balancing markets is done by an external aggregator who uses smart algorithms to deploy the battery in the right way.
Do you want to discover the best approach for implementing a battery in your company? Contact us and we will guide you through the entire process to determine what is needed and what the optimal solution is for your situation!
