245. BESS: Who is making money? - Sep26

Where Are BESS Making Money? Gerard and Laurent had the pleasure of welcoming Ed Porter Director Europe at Modo Energy for an insightful discussion on battery profitability and the evolving economics of Battery Energy Storage Systems (BESS).

Modo Energy is a fast-growing data analytics and market intelligence platform helping energy professionals benchmark asset performance, forecast revenues and evaluate investments in renewable energy and grid-scale battery storage.

Ed outlines three stages in the development of a battery market:

• Stage 1 – Pre-saturation: Batteries can achieve attractive payback periods, sometimes as short as three years, primarily through ancillary services.
• Stage 2 – Wholesale market competition: As ancillary service revenues become more competitive, batteries increasingly rely on wholesale market opportunities, as seen in Australia, Texas and Great Britain.
• Stage 3 – Sophisticated grid services: Once wholesale markets become saturated, batteries move towards more advanced and specialised grid services (voltage, inertia...).

The technology is evolving rapidly, as is the deployment of new battery capacity. This makes future revenues increasingly difficult to predict, particularly because of the cannibalisation effect: as more batteries enter a market, they compete for the same revenue opportunities and can progressively reduce market spreads.

From Australia to PJM, ERCOT and CAISO, and across Great Britain, Spain and Germany, we explore the fundamentals driving battery profitability in different markets. With CAPEX around $500,000/MW, a decent return might be in the region of $70,000–80,000/MW. Yet the picture varies dramatically by market. Poland can deliver around $300,000/MW, while ERCOT and Australia's NEM are currently below $30,000/MW.
These differences highlight why investors need to look beyond headline revenues and consider market structure, competition, saturation, technology and future revenue cannibalisation.

We also discuss Long Duration Energy Storage (LDES) and explore the deeper market and technological levers that can make batteries a profitable long-term investment. A compelling conversation on where BESS is making money today—and, perhaps more importantly, where the opportunities may lie tomorrow.
With the energy industry's largest proprietary dataset, world-class experts and decision-grade models, all powered by Synoptic AI, Wood Mackenzie delivers Intelligence Connected across the energy and natural resources landscape.