Battery storage investors are witnessing a shifting landscape in the sector, navigating the complexities of tolls, floors, and merchant models. As the energy storage market matures, there is a discernible trend suggesting increasing investor comfort with associated risks.
While tolling arrangements and floor prices act to provide a predictable income, the merchant model, where revenues are tied to market prices, introduces an element of risk but also the potential for higher returns. As stakeholders gain a deeper understanding of the risk-return dynamics within the battery storage sector, a more balanced and informed investment landscape emerges.
This trend signifies a maturing market where investors are progressively embracing the potential of battery storage assets while strategically managing associated risks, says GridBeyond’s latest white paper ‘Tolls, floors and merchant models: Do higher risks mean higher returns for battery storage investors?’ by Scott Berrie, Asset Development Director at GridBeyond.
The paper also looks at the battery storage models, associated risks and potential profitability. There are numerous financing options available for battery storage assets including tolling model, merchant model and trading opportunities like Frequency Response Services, Capacity Market and Balancing Mechanism (BM), and wholesale market trading. High energy prices, capacity market auctions, new frequency response products, local flexibility tenders and pathfinder projects have further increased investor appetite for energy storage technologies. Investors are also getting more comfortable with the associated merchant risk and understand that in the absence of long-term or government-backed contracts, the market has created mechanisms that allow a route to market for battery systems says Scott Berrie.
Scott Berrie, Asset Development Director at GridBeyond commented, “Storage assets are a great opportunities for businesses which can increase their revenues according to their strategy and objectives while moving towards net zero goals, AI together with a suite of trading services, allow businesses to generate revenues allowing full access-to-market and to the most lucrative balancing services”.
Download the white paper here.
