15/11/2022

Making it all add up – revenue generation from battery energy storage

Many of our customers are using battery energy storage systems to generate revenue through providing grid services. But how easy is it and what does it all mean? Frazer Wagg, Head of Data services at Connected Energy, explains.

What is an aggregator?

An energy aggregator works with National Grid ESO to provide energy balancing services to ensure an uninterrupted supply of power for consumers. They do this by trading energy from the supply of individual businesses and paying them for it.

The reason the aggregator model is so beneficial to grid operators is that an aggregator can act on behalf of a group of energy storage or generation systems. National Grid ESO only deals in minimum amounts of energy, meaning that smaller sites can’t individually provide services to the grid. But they can access these revenue-generating opportunities through an aggregator.

An aggregator has real time access to different tariff structures and can access better prices on a larger scale.

How does an aggregator work with a battery energy storage system?

A battery energy storage system (BESS) can be used to help balance the grid, by storing and discharging energy when its needed, improving our energy resilience. As we move towards increasing the amount of renewables in our power generation mix, the ability to balance this with flexibility elsewhere on the power system will become increasingly important.

Providing grid balancing service is therefore of value and can be a revenue stream as the National Grid ESO will pay for it. You can find out more about this in our article quantifying the benefits of BESS here.

National Grid buys energy in large blocks, typically by the megawatt (MW). If your BESS provides less than 1MW, it can’t individually supply the grid. An aggregator is a way for several smaller assets in the same area to group together to sell grid balancing solutions. The aggregator is the interface to National Grid ESO and your route to market. They also calculate how much revenue is paid to the owners of each asset. In this way, aggregation also provides a degree of security to National Grid ESO – if there is an issue with one of the assets in your group, other assets can step up and provide that energy, ensuring there is no disruption of service. After all, there is strength in numbers.

How long am I signed up for?

Different aggregators offer different deals, a bit like mortgages. So, you might sign up for a fixed term and a fixed rate, or go for a variable rate which will change depending on energy prices. Two-year contracts are typical, but we have seen 10-year contracts before. At Connected Energy we would recommend considering the contract term and working out what suits you. At the moment, there are some beneficial terms on offer.

Either way, you are not locked into one aggregator forever. Each aggregator has their own control software or hardware that is attached to Connected Energy’s BESS, but they can be swapped out if you decide to pivot from one aggregator to another in the future. Connected Energy designs its BESS to be aggregator-agnostic, making it relatively easy to swap if required.

How do I get paid from an aggregator?

You’re providing a grid balancing service, so you get paid for availability. You are tendering your availability to the aggregator and the aggregator pools the availability of local assets for the market. The aggregator then calculates your share of the revenue and you receive payment once a month, retroactively.

What is the benefit to our customers?

The simple answer is the revenue gained from this model. At the moment, this revenue can help you to cover the cost of the system itself in anything between five and seven years. Over the last year, as energy prices has increased and the energy market has become more volatile, we have seen more opportunity to gain revenue through this model.

How can Connected Energy help?

At Connected Energy we can put you in touch with a number of aggregators. One partner of ours, GridBeyond, specialises in working with battery energy storage systems to leverage them to help balance the grid. By intelligently dispatching energy flexibly, into the right market, at the right time, GridBeyond helps asset owners can unlock new revenues, while supporting our broader transition to a Net Zero future.

Find out more 

On the 1st December, we are hosting a webinar with our partner GridBeyond to discuss the role that batteries, renewables and electric vehicles have in powering the drive to net zero. Sign up for the webinar here.