Q3 Model update V3.1

How does Modo Energy estimate BM revenues?

We suggest heading over to our methodology pages to explore how we model the BM revenues, https://forecastdocs.modoenergy.com/docs/modelling-the-balancing-mechanism .
We model a GB wide bid and offer price, and locational dispatch rates based on the amount of energy we forecast will need to be balanced. This is driven by wind and demand depending on where you are, as well as competition from other flexible assets around the location. We also consider the planned changes to control room systems which will impact battery dispatch rates, and where the site is in relation to any local boundaries and how constrained those boundaries are.

Are those TNUoS charges for standalone BESS or co-located, and is there any difference in the charges when doing alone or co-located?

In addition to live answer: TNUoS changes are for standalone only at the moment, and co-located systems can face different TNUoS charges. There are two code modifications that could change how generation TNUoS is treated for both standalone and co-located assets: CMP393 (all) and CMP316 (co-located only). A decision on these from Ofgem should be made in the latter half of 2024 - more detail can be found in our explainer here: https://modoenergy.com/research/may-24-generation-tnuos-explainer-annual-load-factor-wider-tariff-locational-battery-energy-storage-revenues

What's the long-term forecast for negative pricing (e.g. in 2027-30)?

Negative prices are projected to peak in 2027 and then decline in subsequent years.

When you have done your capex price drop assessment, have you considered whether this is financially viable for OEM's to continue producing cells at these low costs?

We have looked at data from various cell providers to inform our capex estimation, and judge that they are best placed to price the cost of manufacturing their cells! We expect the bulk of manufacturing to come from China, and more local OEMs will struggle to compete.

Do you see over supply of BESS projects in the UK? When?

We think the ~400GW of battery storage sites in the queue for connections right now is not going to get built. However, for those with the best sites, and development in place to get through the variosu hurdles and make it to be an operational assets, we do not see an oversupply.

In your forecast buildout, do you separate distribution vs transmission?

We have looked at the anticipated buildout for sites at the transmission and distribution level in the buildout report, with 4 GW of the pipeline due from distribution connected systems and 10 GW from transmission connected systems, but we don't currently model these separately in our forecast. If we start to see a significant difference in the CAPEX, revenue stack, or build rate of transmission vs distribution we could look to model them separately, but at the moment they're pretty similar.

What's your point of view on the Government's target of 30GW of BESS capacity by 2030?

We haven't seen any official government target of 30GW BESS by 2030, but given current build out rates we think this would be optimistic, as our forecast says 23GW of storage by 2030.

Are you currently modelling the potential impact of the proposed P462 mod on spreads, particularly BM?

At the moment we are assuming that subsidy costs for wind and solar are included in their bid prices - that is, we get negative bid prices driven by renewable subsidies, which batteries can take advantage of. So, we are not currently modelling the impact of P462 - but plam to delve into this in an outlook piece soon.