1. Operators have experienced strong revenues from ancillary services such as Reg-Up, Reg-Down, RRS, and ECRS in ERCOT, with average revenues of US$196,000 per MW last year totaling around US$500 million.
2. Modo Energy predicts market saturation in ancillary services in ERCOT by May 2023 as BESS buildout exceeds market size, resulting in lower prices and a shortage of flexibility resources.
3. Ancillary service revenues for BESS in ERCOT have been decreasing as a proportion of total revenues, with saturation expected to occur on a product-by-product basis, leading to more supply than demand in the market.
Operators in the ancillary services market, including Reg-Up, Reg-Down, and Responsive Reserve Service (RRS), have seen strong revenues in ERCOT, with an average of US$196,000 per MW last year. ECRS, which launched in June 2023, contributed to a quarter of the total revenues, which amounted to around US$500 million. However, revenues in ERCOT are concentrated in high-volatility, weather-related events throughout the year.
Market analytics firm Modo Energy predicts that the ancillary services market will start to saturate in May 2023 as the buildout of battery energy storage systems (BESS) exceeds the market size. Gridmatic’s David Miller noted that market saturation has already been reached during some hours of the day, with BESS revenues from ancillary services decreasing from 90% in 2022 to 85% in 2023.
Modo Energy CEO Quentin Scrimshire-Draper expects market saturation to occur around summer, leading to more supply than demand. There has been a debate in ERCOT over imposing minimum state-of-charge (SOC) rules on BESS resources to ensure reliability. Recent BESS projects in ERCOT include those from Equinor, Gridstor, and RWE totaling 990MWh. Overall, saturation in the ancillary services market is expected to impact BESS operators in ERCOT in the near future.