UK Battery Storage Revenues Set for Rebound by 2026

Rebound in Battery Storage Revenues

The UK consultancy, Cornwall Insight, has forecasted a rebound in battery storage unit profits by 2026 following several years of underperformance. According to the GB Battery Revenue Forecast, annual revenues for 2-hour assets will increase from approximately £96/kW in 2025 to £108/kW by 2026. This boost is attributed to rising wholesale prices, increased price volatility, and the expansion of renewable energy sources.

Market Trends and Projections

The forecast indicates a significant improvement in revenues for battery storage units with expectations of slowing growth towards the decade's end. However, revenue levels will remain much higher than current achievements due to ongoing wholesale price volatility and renewable energy integration.

Industry Insights and Challenges

The National Energy System Operator (NESO) projects that the UK must quintuple its storage capacity to meet government clean power targets. Investment is crucial in this sector, which experienced peak revenues in August 2024 when BESS earned £250/MW on a single day.

Market Dynamics

Britain has faced negative-priced hours, with figures reaching 147 hours in 2024, up from previous years. Modo Energy expects this figure to climb to 188 hours by year-end, driving higher BESS revenues. On 21 August, BESS systems added over 600MW to the grid through the Balancing Mechanism, with an added sale price of £47/MW.

Regulatory and Operational Issues

There are ongoing critiques about the limited involvement of BESS in the Balancing Mechanism. NESO is scheduled to release an LCP Delta definition and report on skip rates by November, alongside deploying transparency tools to mitigate existing issues.

Conclusion

The forecast by Cornwall Insight presents an optimistic outlook for UK's battery storage sector, suggesting substantial revenue recoveries driven by increasing wholesale prices and renewable build-outs. Yet, the industry must navigate investment needs and operational efficiency challenges to achieve governmental clean energy objectives.