Framework to BESS portfolio performance for transparency

Measuring ACTUAL battery optimization performance

enspired provides fully automated battery storage optimization services across several European countries. Due to a lack of market maturity, backtests are currently the only method to estimate the revenue potential of an asset. A backtest uses historical data to evaluate the commercial performance of BESS (battery energy storage systems), and the optimization model typically runs from January 2023 (excluding the energy crisis) up to the previous month. Optimizers have an intrinsic motivation to show high numbers to win customers.

On the other hand, there are so-called bankable forecast providers, such as AFRY and Aurora, that provide up to 30 years of fundamental market modeling, which is accepted by credit institutions for financing battery storage. These forecasts are, by nature, pessimistic to ensure credibility with banks and do, therefore, not reflect the actual commercial value of battery storage. For two years, we have been working with bankable forecast providers to make their forecasts more realistic and properly reflect the value of battery storage.

The challenge of the battery storage owner

When building the business case for a new battery storage project, several financial data points are available:

• CAPEX and OPEX of the asset (typically requested via tenders)
• Pessimistic bankable forecast used for debt financing of the battery storage
• Optimistic backtests from optimizers

Battery storage owners now face the challenge that the bankable forecast 1) does not reflect the real commercial value of the asset and 2) the backtests look too good to be accurate and cannot be validated.

Establishing a culture of BESS revenue transparency

We want to improve decision quality and direct more investments into the energy transition by making revenue potential assumptions more credible. Several players have asked if we would be willing to share our historical trading performance, but we think that “only” sharing trading performance is insufficient to achieve the required legitimacy, as the data can be manipulated and would not add enough value compared to backtests. We see an assurance service by a credible and well-known independent party as the only solution to ensure that shared figures really have been achieved and that battery storage owners are more likely to trust the published data.

With attested performance information, we deliver the missing data point to the battery storage owner. This number can be compared both to bankable forecasts (pessimistic) and backtests (optimistic) to achieve a realistic view of project returns (typically IRR – Internal Rate of Return). For example, our YTD (Year-to-Date) portfolio performance in 2024 was 24% higher than the low scenario forecast (which is used by banks for financing) issued by one of the forecast providers in 2023 for 2024 and matches their central scenario forecast exactly. This information would give the battery storage owner more confidence in planning the business case with the bankable forecast provider`s central scenario.

We are convinced that transparency will help the whole market. Therefore, we are eager to share the assurance service model with EASE (European Association for the Storage of Energy) and recommend it as a best practice for achieving transparency.

The portfolio performance approach

We have chosen the portfolio performance approach because we do not want to publish the performance of single customer assets. The calculated portfolio performance is an annualized EUR/MW figure, which is the current standard for bankable forecasts and backtest results in the industry. The specifics of different battery storage systems must be considered to guarantee that the portfolio performance is comparable, appropriate, and suitable for bringing more transparency and reliability to the battery storage optimization market.

The service is for battery assets located in Germany, as we see the highest demand there, have historical trading performance available, and have more than one battery storage to be considered in the portfolio performance. The first cluster covers battery storage with a 0.9-1.5h duration and full access to cross-market optimization. Most 2h storage assets are still in construction and will be in operation from 2025 on.

Our description of the calculation of the portfolio performance used as reference (criteria and determinations) by the engaged Austrian Chartered Accountant KPMG Austria GmbH is attached to the independent limited assurance report.