BESS operators can earn from idle capacity in new UK market

Flexibility market operator Electron and energy trader Tem have teamed up to launch a new physical hedging market for Great Britain’s electricity grid, inviting battery assets to commit a small portion of capacity in exchange for an annual reservation payment, plus more revenue when called upon.

The new market will be hosted on ElectronConnect, Electron’s flexibility market platform. Tem will use the platform to reserve flexible capacity from distributed energy assets, such as battery storage, which it can then call on when actual generation differs from forecast generation. Tem will also issue day-ahead signals through ElectronConnect so that batteries can continue participating in other markets when not needed.

Physical hedging markets work by offering energy suppliers the chance to purchase electricity in advance, with the expectation that there will be imbalances between forecast and actual generation from renewables in the future. The idea is to limit exposure to the wholesale spot market, where price volatility can lead to high costs for suppliers who need to buy electricity to make up for a shortfall in expected generation.

Asset operators who provide capacity to the new hedging market will receive an annual reservation payment for committing a small portion of capacity, plus utilization payments when capacity is called upon. Electron said in a press release that these payments are designed to complement existing routes to market, such as the capacity market, ancillary services and wholesale trading.

Joe McDonald, co-founder and CEO of Tem, said the physical flexibility market will help manage “the growing imbalance between supply and demand across every half hour od the day, driven by the rapid expansion of variable renewables.”

“The result is a more complete, end-to-end transaction model for electricity, one that reallocates value away from intermediaries and back towards the assets and participants that actually keep the system running.” McDonald said.

Jo-Jo Hubbard, CEO and co-founder of Electron, added: “While it is essentially just a simple capacity product, what’s new is the buyer and the value. Tem is introducing new revenue streams for [distributed energy resource] operators; they are willing to pay above today’s capacity market value, making this opportunity particularly attractive to assets looking to secure or securitize future revenues; and the limiting factors that make today’s capacity market better suited to gas than low carbon technologies and flexibility do not apply here.”