Extreme volatility in wholesale prices has been driven by global market factors
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Phase I
Phase II
Phase III
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Phase I: 2016-2020
Volatility was relatively low. Asset durations were sized (due to cost) to provide Frequency Response. Therefore, durations are predominantly less than 1 hour, making it difficult for batteries to generate revenues from wholesale markets.
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Phase II: 2021-2022
Wholesale market volatility reached unprecedented levels during the 2021/22 period, driven partly by extreme global gas prices following Russia's invasion of Ukraine.
Increase in volatility supported the increasing participation of batteries in the wholesale market.
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Phase III: 2023-Current
Whilst volatility has softened compared to 2022, it has remained elevated compared to long-term historic levels. Milder than average winter, high power plant availability and high levels of gas storage released some pressure from H2 of 2023
Frequency response declined in importance throughout 2023 as volume of batteries in operation exceeded demand. Energy trading emerged as the main revenue stream, fueled by lower battery costs.
EPEX SPOT; and Elexon
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Daily price spreads are forecasted to grow through to 2040
Data: Internal analysis based on data from leading market advisors.
“We anticipate that energy market volatility and continued demand for higher amounts of renewable energy will increase our strong value proposition for battery storage within NESF’s portfolio. We continue to evaluate battery storage opportunities that meet our investment threshold and look forward to building out this exciting growth sector for NESF.” – Ross Grier, UK Managing Director of NextEnergy Capital
