Batteries are a key component in the transition to renewable energy.
Why Batteries need advanced technology for maximizing profits
Mayur Andulkar
5 min read
The German power market is one of the most advanced globally when it comes to utilizing batteries for energy storage. These batteries generate value primarily through two mechanisms:
Firstly, batteries provide ancillary services in control energy markets such as Frequency Containment Reserve (FCR) and Automatic Frequency Restoration (AFRR). These markets are critical for maintaining grid stability by balancing frequency deviations.
Secondly, batteries engage in arbitrage trading in the day-ahead and intraday markets. This involves purchasing energy when prices are low, storing it in the battery, and selling it when prices rise. While markets like the UK allow batteries to participate in imbalance trading, this is not permitted in Germany, adding another layer of complexity.
The opportunities for batteries in the energy market come with significant complexity. The rules, timelines, and mechanisms for each market differ. For example, bidding times vary across markets:
The FCR market requires bids by 8:00 AM the day before delivery.
The AFRR capacity market follows at 9:00 AM.
Bidding for the day-ahead market closes three hours later, and subsequent bids for the intraday market follow shortly after.
The delivery periods also vary. Ancillary services often involve four-hour durations, while the AFRR energy market has shorter 15-minute intervals. The day-ahead market operates with one-hour products, while the intraday market splits into 15-minute windows.
On top of this, auction mechanisms differ. Some products use a pay-as-bid scheme, where bidders receive the price they offer, while others use pay-as-clear, where all participants receive the clearing price. Battery operators must decide how and when to allocate their capacity, which can only be sold once during a given timeframe.
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The German intraday market is highly liquid, making it a crucial revenue source for batteries. One unique feature is continuous intraday trading, where traders can buy and sell the same product multiple times before physical delivery.
For example, a trader might sell a product for the 13:00–13:15 time slot at 8:00 AM, buy it back at 9:00 AM, and repeat the cycle several times. Each transaction generates arbitrage gains from price differences, creating revenue without physically charging or discharging the battery.
This trading activity is particularly relevant in a grid dominated by renewable energy, where forecasting errors and demand fluctuations create uncertainty. Continuous trading enables fine-tuning close to the delivery window, ensuring the battery is ultimately used where it delivers the highest value.
The revenue potential of a battery depends on its configuration, such as its size and duration. Larger batteries with longer durations can access more markets and unlock greater revenue potential. On average, about two-thirds of revenue for German batteries comes from energy-driven markets like AFRR, day-ahead, and intraday trading. The remaining one-third comes from ancillary services like AFRR and FCR.
To optimize revenues, battery operators need to balance multiple revenue streams while minimizing wear and tear on their assets. This requires advanced forecasting, data analysis, and dynamic decision-making.
Battery trading strategies must be optimized in real time, adapting to changing market conditions. While overall market patterns remain relatively stable, small daily variations can significantly alter dispatch schedules. This requires frequent updates to trading strategies, informed by detailed market data and predictive analytics.
The German power market offers immense opportunities, but its complexity makes managing energy storage assets a daunting task. On any given day, a battery can be traded across more than 300 different contracts. Without advanced tools, this level of complexity would be impossible to manage effectively.
At Re-Twin Energy, we provide cutting-edge solutions to help battery owners navigate the complexities of power markets. Our technology enables you to forecast market conditions, optimize trading strategies, and make data-driven decisions with ease. By simplifying the complexities of energy storage management, we ensure that battery owners maximize their returns while contributing to a more sustainable energy future.
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