How can we evaluate a battery's revenue potential?
Four main measurement approaches are currently used to evaluate the revenue potential of a battery asset: bankable forecasts, backtests, indices, and portfolio performance. How do these methods differ from each other, and which one is the most reliable?
- Bankable forecast
A bankable forecast is a longer-term, model-driven perspective of revenue potential based on current market conditions, future buildout, and regulatory impacts. Short-term volatility and trends are often not captured. Bankable forecasts are typically updated bi-annually and used to secure project financing from credit institutions or banks.
- Backtest
A backtest is a retrospective analysis of how a model or strategy could have performed using historical data. Optimizers commonly use backtests to indicate future revenue potential. However, they are easily manipulable, as low-revenue days/weeks/months can be excluded from the calculation to artificially inflate an asset’s overall commercial performance.
- Battery index
A battery index serves as a composite metric that benchmarks an asset’s performance and revenue potential against industry standards. It can be utilized to compare revenue claims of optimizers, verify performance, and challenge backtests.
- Portfolio performance
Portfolio performance refers to the independently confirmed commercial performance of BESS assets. It shows REAL revenue and what was provably achieved in the markets by an optimizer. Since it reflects actual numbers, portfolio performance is the most transparent tool available for revenue assessment.
Keep in mind that your asset's realizable revenue ultimately depends on your revenue strategy and risk tolerance. Read about your options here.
What is your battery's revenue potential?