Increased Revenues through Trading with Battery Storage

The integration of stationary battery storage systems into commercial and industrial projects is becoming increasingly attractive, not just for self-consumption optimization or reduction of grid fees, but also through additional revenues in the electricity market. Developers planning storage solutions today should consider the possibilities and challenges of market integration from the start.

Market Participation Options for C&I Battery Storage

Industries and commercial businesses can utilize battery storage systems for market participation in various ways. Essentially, there are two models:

• Hybrid use of the same battery for Behind-the-Meter (BTM) and Front-of-Meter (FTM) – i.e., a single battery storage system takes on both internal operational tasks (e.g., peak shaving, self-consumption optimization) as well as grid and market services (e.g., provision of balancing power, electricity trading).

• Use of separate battery storage for BTM and FTM – i.e., two separate storage systems: one dedicated for internal company purposes, while the other is operated exclusively for the electricity market (as an independent facility with grid connection).

Comparison: Hybrid Dual Use vs. Separate Storage

To compare the two approaches, Table 1 highlights the key characteristics, advantages, and disadvantages:

Table 1: Comparison between dual (hybrid) use of a single battery vs. separate BTM and FTM storage systems.

In many cases, the dual use of a battery storage system appears advantageous, as energy costs can be simultaneously reduced and new revenues generated. For example, an industrial storage system can absorb solar surpluses during the day and shave peak loads in the evening, while providing free capacity for grid services at other times. This dual use opens up additional revenue streams and increases the profitability of investing in a battery storage system.

However, the operational and regulatory requirements for hybrid use are higher. Some energy service providers, therefore, recommend a separate approach: EnBW, for example, focuses on marketing storage systems without self-consumption background – as a guideline, ≥ 1 MW power and 1 MWh capacity, used exclusively for the market [1]. Such a stand-alone storage system can be optimally operated independently of consumer loads on the regulatory and spot markets.

Practical Challenges of Hybrid Models

The combination of BTM and FTM applications in a single storage presents specific requirements in terms of technology, market processes, and organization. Specifically, the following challenges are relevant:

Energy Management and Control of Hybrid Applications

A high-performance energy management system (EMS) is essential for using a battery storage system for both self-consumption and market participation concurrently. The EMS must coordinate multiple uses in real-time – e.g., sending grid regulation signals to the battery without jeopardizing local supply security or peak shaving strategy.

Such hybrid use-cases place high demands on both hardware and software. In many projects, a network connection with a virtual power plant is realized: A remote control unit connects the battery with the aggregator. At the same time, a local EMS keeps track of on-site operations (charging state, load profile, etc.). In any case, energy management must ensure that minimum storage levels, power reserves, and response times are adhered to avoid violating external commitments (e.g., to provide balancing power).

Minimum Bids and Aggregation of Capacities

Many lucrative electricity markets require minimum sizes for bids that single C&I battery storage systems often cannot reach alone. For primary regulation reserve (FCR), a typical minimum power of 1 MW is still required, and for secondary (aFRR) and tertiary regulation reserve (mFRR), it is usually 1–4 MW, depending on the transmission system operator. Therefore, in practice, the aggregation of several decentralized storage systems via an aggregator is usually necessary to bundle marketable services.

In contrast, the entry barriers in the day-ahead and intraday trading are significantly lower: Here, the minimum bid size is only 0.1 MWh (100 kWh). Thus, even smaller storage systems can participate directly – provided they have access to the trading infrastructure. Nevertheless, many aggregators or direct marketers bundle small installations to trade large blocks efficiently and reduce transaction costs.

Balancing Group Management and Risks (Forecast Deviations, Schedules)

Once a battery storage system feeds energy into or draws from the public grid, this must occur within a balancing group. Every market participation therefore requires a balancing group manager (BGM) – usually an energy supplier or direct marketer – responsible for schedule notification and quantity balancing towards the transmission system operator.

For FTM storage (storage with its own grid connection), this role is usually taken on by the direct marketer. The setup is relatively straightforward as the storage is treated as an independent facility with clearly defined feed-in and take-off points.

For BTM storage (behind the meter), the situation is more complex: The battery shares the grid connection with other consumers, requiring an exact measurement and separation of self-consumption and market feed-in. For this, a separate sub-balancing group must be set up, which entails additional technical and administrative effort as well as suitable partners. In practice, the market integration of BTM batteries often fails because no BGM is willing to take responsibility for the complex and risk-prone balancing group.

Additionally, BGMs bear the risk of forecast deviations: Schedules must report feed-in and take-off profiles accurately every 15 minutes. A storage system that functions both as a producer and consumer – as seen in hybrid use – can be difficult to predict. If actual performance deviates from the planned schedule (e.g., due to unplanned self-demand coverage), compensation energy costs arise, which can have a significant economic impact.

For these reasons, a separate FTM storage system is often the more pragmatic solution: It can be technically clearly delineated, more easily integrated regulatorily, and is more readily accepted by marketers.

Conclusion: Market Integration Yes – but with the Right Setup

Battery storage systems offer industries and commercial enterprises far more than just peak shaving or self-consumption optimization today. Participation in the electricity market – whether through balancing power or trading – opens up additional revenue potential and significantly enhances economic viability. But the path to achieving this is challenging: Market processes, technical requirements, and regulatory provisions demand a well-thought-out concept.

The hybrid use of a storage system for BTM and FTM purposes sounds economically attractive, but is often only feasible with significant control effort and additional risks. Particularly balancing group management poses a major hurdle for BTM batteries, as it requires precise measurement and data allocation and a balancing group manager willing to assume the complex responsibility of schedule management – which is often not the case in practice.

Separately managed FTM storage systems offer clear advantages: They are technically clearly defined, more easily integrated regulatorily, and much simpler to handle from the perspective of direct marketers and aggregators. FTM storage systems are often the preferred solution for prequalified participation in balancing power markets as well.

Project developers should, therefore, weigh early on whether a combined model is truly viable both economically and organizationally – or if a dedicated market storage system as an FTM facility is the more sustainable way to efficiently unlock market opportunities. An intelligent EMS, a strong aggregator, and a clean measurement concept are indispensable in both cases.

[1] https://www.enbw.com/energiehandel/batterievermarktung