Alternative Macro Scenarios

In our run library, we provide some alternative scenarios for battery revenues. These can also be selected when requesting a custom run. These are designed to show scenarios in which battery revenues would be higher or lower.

Here we describe these various scenarios.

1a. Lower dispatch rates in the Balancing Mechanism

If control room improvements don't improve skip rates for batteries in the Balancing Mechanism, or the transmission system infrastructure build-out means dispatch rates don't improve, we could see the Balancing Mechanism being a smaller fraction of the revenue stack.

We lower the dispatch rates which has a knock-on impact of reducing the BM revenues across the entire forecast horizon.

The dispatch rates in our central case are shown here.

1b. Higher dispatch rates in the Balancing Mechanism

In the opposite situation to the above, if control room improvements are successful or the transmission system is improved greatly, batteries will be able to take up a greater proportion of the Balancing Mechanism and increase their revenues.

2a. Lower gas and carbon prices

In the central scenario, we use forward prices, and the projections from the FES, for gas and carbon prices.

We reduce these by 20% across for forecast horizon and evaluate the impact for battery energy storage. This is one of the factors with the greatest impact on battery revenues in the short-term, but will have less and less of an impact over time as gas becomes a much smaller part of the generation stack.

2b. Higher gas and carbon prices

To see the opposite effect of the above, we have also looked at a scenario with gas and carbon prices being 20% higher. As expected, this has a similar but opposite effect of higher revenues in the short-term, with the increase reducing over time.

3a. Increased Demand Side Response

In this scenario, we double the capacity of Demand Side Response. We also make it cheaper, so it sits slightly lower in the generation stack: £250/MWh for 'cheap', £500/MWh for 'medium' and £1500/MWh for 'expensive' (half the price of the central scenario).

DSR is a big competitor for energy storage, and this gives the biggest reduction in revenues for batteries across the forecast horizon. The effects are not felt to a significant degree until the mid 2030s, but this then quickly leads to a considerable reduction in battery revenues.

3b. Decreased Demand Side Response

If DSR is not pushed as much as expected and consumers are not easily persuaded to flex their demand downwards at peak times, this could lead to the opposite effect of the above.

In this scenario, we halve the capacity of Demand Side Response and make it more expensive, so it sits higher in the generation stack: £750/MWh for 'cheap', £1500/MWh for 'medium' and £4500/MWh for 'expensive' (50% more expensive than the central scenario).

This has a similar but opposite effect of greatly increased revenues from the mid 2030s onwards.

4. The CCGT fleet retires later.

It is possible that transmission system infrastructure means the speed of transition to renewables is slower than planned and CCGTs are forced to stay on for longer. This will lead to a reduction of battery revenues from the mid 2030s onwards, as CCGTs will continue to be able to provide some system flexibility for longer.

We have not built a corresponding "high" scenario relating to CCGT retirement, as we don't see there being much likelihood of CCGTs retiring earlier than currently planned.