Assessing the Potential of BESS
despite the uncertainties

Energy Trading · May 12, 2024 · 10-minute read

Webinar - Modeling the Economic Potential of BESS: How to Manage Uncertainty

On June 17 at 2:00 p.m., Compass Lexecon, Greensolver, and StackEase hosted a webinar titled “Modeling the Economic Potential of BESS: How to Manage Uncertainty.”

Topics covered:

Greensolver – Reanalysis of the 2020–2025 Business Plan: difference between projected and actual revenue for this period.
Compass Lexceon – Market Price Modeling: Scenarios and Methods for Predicting Long-Term Prices.
StackEase – Revenue Generated by BESS: Fundamental Modeling, Assumptions, Presentation of Typical Results, and Sensitivity Analysis.
Compass Lexecon – Market Trends: New Rules, Future Insights from the U.K. Market, and Best Practices.

The replay and answers to the questions are available below.

Re-analysis of the 2020–2025 Business Plan

What are the forecasts for after 2025, given that the last two years had negative EBITDA? Is there no planned participation in the day-ahead market?

The aFRR was certified, and trading began in 2026. This was necessary to increase EBITDA.

How does the actual result compare to other scenarios (low, high)?

That was the baseline scenario; starting in 2024, we're under the low-case scenario

Have you done the same exercise for 2-hour projects with a BP created in 2024 that is part of the aFRR?

Yes, StackEase launched its consulting business in 2025, so we don't have access to long-term price forecasts issued in 2023. The price forecasts from early 2025 were higher than the actual results.

What is your conclusion based on this analysis? Should we invest in BESS today, and does this affect access to financing for assets whose income is not guaranteed?

As flexibility assets, BESS will be useful and necessary on the grid in the coming years to stabilize the grid and shift generation blocks toward consumption. What this analysis highlights, in my view, is the need to develop assets that are resilient to future market changes. From a financing perspective, the issue of securing revenue is paramount, and the Floor or SWAP provide a solution to this challenge.

A few weeks ago, I attended a webinar with RTE, during which they said that the market for frequency regulation systems for battery energy storage systems (BESS) will come to an end once 2 GW of battery capacity has been installed. Is that true?

To the best of our knowledge, system services are a requirement expressed by RTE that is independent of the asset providing them. This requirement depends on the worst-case scenario that RTE must be able to manage; for example, it is the risk of a nuclear power plant outage that determines the approximately 500 MW of power called upon each day through the FCR.
On the other hand, with 2 GW of certified batteries, reserve prices on the SSYf may become low, since batteries have a low participation cost.

What about the MARI platform?

MARI will make it possible to further enhance the value of batteries, but this does not apply to the battery studied by Greensolver, which is a 1-hour battery

How can we explain the increase in operating expenses?

Fixed-price maintenance contracts did not increase, but there were variable contracts based on revenue. There was also more maintenance than anticipated in the budget (air conditioning, inverters). In 2020, the batteries were less well-prepared for the long term; if we were to rebuild this same fleet today, operating expenses would be lower.

Market Price Modeling

What do you estimate the scope of the aFRR certification to be? Does it take into account the new aFRR certification framework?

Certification coefficients based on runtime: approximately 50% for a 2-hour battery.

Given that flexibility is growing rapidly across the grid, how can we be confident in the ability of batteries to capture arbitrage revenues based on a spread that is likely to narrow as flexibility expands?

Spreads are narrowing structurally; we need mechanisms to secure revenue, such as the capacity mechanism, which will set aside a portion of its volume for decarbonized flexibility options (including batteries)
Furthermore, the scenarios presented are based on a 20-year equilibrium, which does not account for the crisis events that have been frequent in recent years.

Are the market sizes for system services of the same order of magnitude in other European countries?

No, Germany and France are the largest in terms of size for both the primary and secondary reserves. The markets are not cannibalizing each other at the same rate.

Revenue Generated by BESS

Do you optimize the SOC between days based on the forecast for the next day? Or is one of the model's constraints to return to a 50% SOC by midnight?

The SoC is not required to return to 50% at midnight. Optimization is performed over a rolling period of several days.

What MW/MWh ratio can be expected at standalone sites for an energy storage system in 2–3 years? The same applies to co-located PV + BESS projects in S9.

The 2-hour batteries were perfectly sized for the pre-24-window aFRR. Now, a 1-hour-and-15-minute battery is sufficient. However, it is necessary to be able to properly address the wholesale markets, as revenues from SSYf are uncertain. We encourage batteries longer than 2 hours, but this should be determined on a case-by-case basis depending on the site type.

So, if I understand the assumptions correctly, if the intraday component depends on the DA and isn't modeled as such, there is no virtual cycling. I recall that for every 1.5 physical cycles, there can be up to 5.6 financial cycles. To what extent does this impact revenue?

There are many more financial cycles than physical cycles on the CID. We observe that the CID has little effect on the number of cycles. A battery lasts more than twice as long in a CID + DA configuration compared to DA alone. We expect this value to increase because the volume on the CID is growing faster than that on the DA.

What battery size do these results correspond to?

Around 3 a.m.

Is the price of the spreads paid by the BESS when it is called upon by a reserve? Or is it because we want to restore our BESS’s SOC for future commitments in the coming hours? What is the “correction” in the revenue stack—is it the price of the spreads?

The correction displayed on the stack corresponds to the deviations. The energy required to restore the SoC is directed toward the deviations; it could be directed toward continuous intraday trading.

Are the average revenues in €/MW reported in the StackEase indices calculated based on installed capacity or certified capacity?

Average revenues from reserve markets are calculated based on the available capacity in those markets—that is, the certifiable capacity.

What about the aggregator's projected performance in terms of expected versus realized returns? To what extent can the discrepancies be attributed to market prices and/or the aggregator's performance?

In France, the volume traded on the SPOT market over a rolling year between 2024 and 2025 was 141.5 TWh. Therefore, on average, the depth of the French market is approximately 16 GW. For intraday trading, the auction depth is 500 MW, and 2.6 GW for the continuous market. Growth is expected for both markets, with faster expansion for the intraday market (seehttps://www.epexspot.com/sites/default/files/download_center_files/2025-01-28_EPEXSPOT_Annual Power Trading Results 2024_finaldraft.pdf?utm_source=chatgpt.com for past trends).

Do you also take calendar aging into account in addition to cycle aging? Is the decline in battery capacity (due to a decrease in SOH) factored into the revenue calculations?

Yes, at StackEase, we also take calendar aging into account, in addition to cyclic aging. And the capacity loss resulting from this aging is fully factored into our estimates of battery revenue.

What are the assumptions regarding changes in the Turpe (fixed and variable) in the business plans over 15 years? Is there high sensitivity?

We do not make any specific assumptions about changes in the TURPE in our revenue calculations; instead, we use the most recent available figures. We believe it would be highly uncertain to make such assumptions, although we acknowledge that future developments could significantly impact BESS revenues.

Does Stackease use its own long-term price forecasts (for wholesale and system services) or those of a third party, such as Compass Lexecon?

StackEase does not create its own long-term price forecasts for its analyses. We purchase them from forecasters—that’s where the expertise lies, just as it does with Compass.

Do you see any regulatory changes regarding the TURPE for BT, which is still 3 to 4 times more expensive than the TURPE for HTA/HTB?

We have no particular opinion on this matter.

What about the bankability of such a project? Do lenders turn to companies like StackEase to gain confidence in the future revenue profile?

Lenders can indeed use StackEase to assess the revenue potential of a storage project. In such cases, it is common to use conservative price scenarios.

Are these price forecasts deterministic (a single curve), or do you factor in a certain degree of volatility? (in order to account for crisis situations, as Pierre Emmanuel mentioned, which can make an asset profitable much more quickly than a baseline scenario)

The price forecasts we use are deterministic, yes. We are aware, as Pierre-Emmanuel said, that there could be crises that would allow the asset to become profitable more quickly. Nevertheless, we are not in a position to simulate the impact of such crises on a battery’s revenue based on a deterministic curve.

Do financial transactions (5 virtual cycles) fall under the revenue-sharing arrangement between Stakkease and the asset owner?

Under our aggregation agreements, revenue from financial transactions on the continuous intraday market is included in the pool of optimizable net revenue, which is shared between the owner and StackEase.

Market Trends

What are the income prospects (significant or not?) for this 15-year MKP?

Price forecasts for the capacity market vary significantly from one forecaster to another. However, they do agree that the resulting revenues will be substantial for battery owners.

We’re talking about price cannibalization in the capacity market (Reserve) outside of MKP; trading prices are rising, okay, but you’re using the UK as a possible forecast example—what about a country like Spain (which doesn’t have MKP yet), where trading liquidity (DA+Intra) is low due to a very narrow spread and generally low prices? As of now, a downward price trend isn’t very interesting.

Indeed, there are scenarios in which both revenue from reserve capacity and revenue from trading would be low. In such cases, a storage asset would struggle to be profitable. However, we assume that such assets will be necessary in the future, and that system operators will ensure that these assets are profitable.
RTE, in fact, sets its maximum price for the capacity mechanism based on the “missing money”—in other words, the price that must be paid to developers to ensure the project is carried out.

Revenue from battery sales is declining due to cannibalization of system services, lower spreads than elsewhere, and falling capacity-based revenue, while secured revenue (tolling) relies on Compass-type models, with no crisis scenario. How do you view the financing of BESS?

Greensolver has worked on many projects that have been funded or are in the process of being funded. Banks are asking for low- or mid-low-scenario projections. Revenue is down compared to 2022–2023, but batteries cost less in terms of CAPEX, and OPEX has been optimized. The new regulations and reserves are generating additional revenue.

In practical terms, are banks currently able to finance full-merchant projects without a fixed-income component, such as a floor?

Generally speaking, no, unless it's in a portfolio where only a few batteries are used for full-merchant operations. The debt will be sized based on the size of the aggregation contract; otherwise, you'll need to use PV plus batteries and size the debt based on the PV capacity.