Together with enspired GmbH, ISEA is developing an index for the German battery market that is intended to transparently map the revenue potential for large-scale storage systems with regard to grid services. The index is currently under development and will be finished in the coming months (Date: 09.2024).
The index was developed by Jonas Brucksch and Jonas van Ouwerkerk. The index takes into account the spot markets (day-ahead auction, intraday auction, intraday continuous trading) as well as the balancing markets (FCR, aFRR). The index is intended to help increase market transparency and provide a basis for investors, project developers and traders to better evaluate potential revenues. The index is intended to create comparability, but not to reflect the actual maximum achievable proceeds. Rather, the index should be designed so simply that it is comprehensible and can be calculated in Excel, for example.
Revenue potential for Grid-scale batteries
The index developed is based on a weighting of the revenues of the individual markets. The revenues of the individual markets are shown in the upper figure as an example for calendar week 31 (2024) for a 2-hour system with a limit of 2 cycles per day. High revenues can be generated in particular on continuous intraday trading and with aFRR market participation. For spot market trading, the current status for caclulating individual market revenue potentials does not take into account financial trades, but only asset-backed trades with actual physical delivery.
The cross-market index value is calculated from the potentials of the individual markets in the lower figure, when combining all considerded markets. The revenue potential is included in the index in proportion to thalf of the maxium potential of all single markets. A possible target range is estimated for financial trades (maximum factor of 5 compared to intraday continuous asset-backed trades).
Abbreviations:
DA: Day-ahead market
IDA1: Intraday auction (calculation with averaged indices one hour prior to delivery)
ID1: Intraday continuous trading (calculation with averaged index one hour before delivery)
FCR: Primary control reserve (Frequency Containment Reserve)
aFRR: Secondary control reserve (Automatic Frequency Restoration Reserve)
Interactive graphic: Click on the legend.
Interactive graphic: Click on the legend.
Methodology
The index developed is based on a simple and comprehensible calculation that can be downloaded as an Excel file once the index has been completed. The methodology is based on the revenue potential of the individual markets, which are then combined using suitable assumptions. Currently, 1 and 2 hour systems are considered, each with a limit of 1 or 2 equivalent full cycles per day.
The following assumptions are made to calculate the potential revenues of the individual markets:
Day-ahead/intraday trading: the power limit (Pmax) and state-of-charge limits (0-100%) of the battery must not be exceeded.
Frequency Containment Reserve (FCR): maximum marketable capacity is reduced by 25% according to the pre-qualification (PQ) conditions.
Automatic Frequency Restoration Reserve (aFRR): symmetrical bidding is assumed for the positive and negative capacity market (state of charge 50%). The energy market is not taken into account in the current status. The marketable capacity is reduced by 50% for the 1-hour system so that one hour provision is possible in both directions (PQ-conditions).
Round-trip efficiency: 90%
In the current version, the individual markets are weighted according to half of their share of the maximum revenue potential of all single markets (experice value) when calculating the potential revenue of the Cross-Market index. A fixed factor of 5 compared to the intraday continuous market share (experience value) is assumed for financial trades (virtual trading).