How Does Energy Bidding Work for Battery Systems in Power Markets?

Understanding how battery systems participate in power markets can seem complex at first, but the fundamentals are surprisingly straightforward. The basics of energy bidding are essential knowledge for anyone working in the utility-scale energy storage space – from entrepreneurs and industry professionals to those curious about grid stabilization.

In this video clip from the free course “Introduction to Software for Battery Systems,” instructor Peter Gruenbaum breaks down the key concepts behind energy bidding for battery systems. If you find this overview helpful and want to dive deeper into battery system software, enroll in the “Introduction to Software for Battery Systems” course today.

Transcript below.

 Most energy bidding occurs in what’s called the day ahead market. Let’s say it’s Monday. Typically sometime in the morning, you would create a bid for the following day, Tuesday, from midnight to midnight. Each block of time, which is typically each hour, but it can be different for different markets, contains how much energy you’re offering and at what price.

The energy market then decides which offers to award, and if you’re awarded that offer, then you have to provide that power. The decisions on which offers to award are based on what utilities are willing to pay. Utilities make forecasts on what energy usage will be. 

In addition to day ahead bidding, there’s also realtime bidding. It’s impossible to predict the day before exactly what the energy usage will be, so on top of the day ahead bids, there are adjustments using the realtime market. Bids are submitted just before the time block, and each block of time contains how much energy you’re offering and at what price – usually for the next couple of hours. The time interval depends on the market. It can be as short as five minutes or as long as an hour. 

How does a battery system make money with its energy bids? 

The most common way is energy arbitrage, which I explained before. You charge the battery when prices are low by buying power, and you discharge the battery when prices are high by selling power. 

You can also participate in the ancillary services market. This is where you get paid to have energy in reserve or occasionally take energy off the grid when needed. 

There are multiple types of ancillary services. Regulation up and regulation down mean that you’re promising to take action when you get a signal from the market that it needs you. Regulation up means that you’ve got energy in your battery that you can send into the grid when you get the signal. Regulation down means that you’ve got capacity to store energy in your battery, and you can take that energy from the grid when you get the signal. 

Frequency response means that you’re monitoring the frequency of the grid to take energy in or out. I’ll explain this more later.

You can also have a combination of the two where you wait until you get a signal from the energy market to do frequency response. You get paid whether the energy is used or not. Ancillary services are typically only allowed in a day ahead markets, not the real-time markets.