Winners and Losers in Battery Storage

Winners and Losers in Battery Storage

Battery storage is no longer an emerging technology.

Storage is a pillar of evolving energy markets. Markets with deep renewable penetration, such as ERCOT and CAISO, are proving to be fertile ground for battery energy storage systems (BESS). For example, this past February, an oversupply of solar generation in CAISO led to negative pricing events, creating strong market conditions for storage with BESS assets participating in energy arbitrage and “reg down” ancillary services. With energy demand expected to increase and new gas generation projects severely supply constrained, we should expect that new generation will come from intermittent renewable sources. In fact, 90% of new generation in the US in 2024 came from renewables and an even greater share is expected for 2025. This increase must be matched with new BESS capacity in order to maintain grid resiliency and stability.

Taking a closer look at ERCOT data from Modo Energy reveals that, while BESS storage at the macro level is profitable, there are clear winners and losers in the space. Comparing revenues from 2024 to 2023 shows that, with fewer extreme temperature events stressing energy demand and a more saturated storage market driving down margins in ancillary services, assets need to be optimized both in operation and utilization in order to remain profitable. For asset operators who struggled in 2024, this begs the question: Why is my asset not operating optimally?

We have reviewed both publicly available data as well as data collected by asset historians and consistently observe two problems:

1. Market participation signals produced by BMS and EMS are not accurate (as much as 30% error, with typical errors of 15%)
2. Assets are out of balance, with large SoC deltas between blocks and even between individual racks within a block.

These problems result in either not utilizing full asset capacity or bidding more than is available, causing costly base point deviations as a consequence. Attempting to resolve balancing issues requires asset downtime, which risks missing out on revenue (for storage, a few individual days a year can contribute to the majority of the annual revenue. You do not want to be busy balancing your asset when there is a Demand Response Event, or DRE).

Recent events like the Energy Storage Summit USA in Dallas reveal that the industry is catching on to both issues plaguing asset operators as well as the underlying causes. A well-attended panel, “Moving on from the Degradation Myth: The Importance of Calculating State-of-Charge,” highlighted growing awareness of system shortcomings when vivid descriptions of unexpected derating and large SoC errors noticeably resonated with asset operators in the room. Also noticeable was widespread understanding that access to voltage, current, and temperature signals, ideally at the cell level, is critical for resolving performance issues. OEMs are just now starting to feel the pressure to give operators access to their own asset’s data. In fact, we’ve seen instances where asset owners pay upwards of USD$25k just to gain access to data from the battery systems they manage. Today, OEMs still think they can hold your data hostage, but we expect this will shift quickly as more and more people demand access to their asset’s signals.

To summarize, asset operators are observing performance issues that they did not expect when they commissioned their projects, and these problems tend to compound as assets age. Operators recognize the underlying causes of performance issues, and they are attending conference talks and listening to podcasts to try and find solutions, because OEMs aren’t providing them.

What stood out to us at this panel discussion in Dallas was the response to the closing question. When asked what the future of state estimation might be in 5 years, one panelist representing a cloud based analytics service answered that the signals would be accurately reported in real-time.

We agree that the most impactful resolution to poor market participation signals and imbalance problems is accurate, real-time software that allows operators to confidently utilize the full capacity of their assets and optimize their maintenance activities. But we’re unwilling to wait five years to see this materialize. That is why, today, we offer Zitara for BESS, a real-time on-prem solution designed to make your asset a winner in increasingly competitive markets. Reach out today and get a free Insights Report to see how much your battery assets stand to gain from better data.