A simple example with a 10 MW battery to understand where the revenue of a storage system comes from, and what to bear in mind before drawing conclusions.
Let's take a simple case to understand how a grid-connected battery makes money.
The example
We have a battery with 10 MW of power that can charge in 2 hours and discharge in another 2. In other words, it can store around 20 MWh, roughly what 2,000 Spanish households consume in a day.
- Charging: it buys energy on the market during the cheapest hours, for example from 11:00 to 13:00, when solar production peaks.
- Discharging: it sells that energy from 21:00 to 23:00, when the sun has set and demand is still high.
The numbers (indicative)
To keep it simple, let's assume these prices on a given day:
| Item | Assumption |
|---|---|
| Purchase price (midday) | €20/MWh |
| Sale price (evening) | €110/MWh |
| Round-trip efficiency | 85% |
To deliver 20 MWh in the evening, the battery has to buy about 23.5 MWh at midday, because part of the energy is lost in the process.
- Purchase cost: 23.5 MWh × €20/MWh ≈ €470
- Sales revenue: 20 MWh × €110/MWh = €2,200
- Gross margin for the day: ≈ €1,730
If this happened every day, it would add up to more than €600,000 a year. But reality is not that linear.
What the example doesn't tell you
- Not every day has such a large price spread. In winter or on cloudy days, the difference between midday and evening can be much smaller.
- The more batteries there are, the smaller the spread. If they all charge and discharge at the same time, prices converge.
- The battery wears out. Each cycle slightly reduces its capacity, and this has to be reflected in the operating strategy and in the maintenance contract with the manufacturer.
- There are other revenue streams. Besides buying low and selling high, a battery can be paid for helping to balance the grid (balancing services) or for being available when the system needs it (capacity markets).
- Costs: the initial investment, grid connection, maintenance, insurance and grid charges all reduce the final margin.
Conclusion
Storage can be very profitable, but its profitability depends on how it is operated and which markets it takes part in. The key lies in good sizing, a well-negotiated supply and maintenance contract and a realistic operating strategy. Analysing all this is exactly the work that has to be done before investing.