Developers are adjusting strategies as energy arbitrage replaces ancillary services as the main revenue source in the Electric Reliability Council of Texas (ERCOT).
Texas was once hailed as one of the most lucrative battery markets in the United States. But a sharp decline in revenues from both energy arbitrage and ancillary services over the last year raises serious questions about whether the market has hit its saturation point, or if the slump is just the maturing market experiencing growing pains.
Brandt Vermillion, the ERCOT market lead at battery storage analysis firm Modo Energy, explained that revenues declined significantly from 2023 to 2024 per megawatt.
“Some of that is outside the scope of saturation,” he told ESS News. But, while a milder winter in 2024 and the loss of a new ancillary service in ERCOT that had boosted prices in 2023 are partly to blame, Vermillion pointed to more fundamental changes.
“Total capacity offered has grown really rapidly,” he said, adding that batteries are now increasingly relying on energy arbitrage to earn the majority of their revenue, not ancillary services. “Offers into the market have grown at a higher rate and doubled last year.”
In 2023, Modo Energy found that 85% of BESS revenues were from ancillary services; a year later, nearly 60% percent of revenues came from energy arbitration. Vermillion noted that the shift has come as battery operators try to adapt to an increasingly competitive ancillary market with a plateauing demand.
And much of that supply is being offered at extremely low prices.
Read the full article on pv magazine’s ESS News website
