Battery Energy Storage Systems (BESS) are often portrayed as multi-revenue machines: arbitrage, ancillary services, capacity payments, congestion relief, and peak shaving. The narrative in mature markets suggests that a battery can simultaneously extract value from all streams, which is true when this is strategically executed. But in markets that aren’t fully developed, the revenue stack can quickly become more theoretical than real — and investors often assume material cash flows that never actually materialise.
Real Examples of Revenue Stacking in Mature Markets
Globally, where markets are more sophisticated, the revenue stack is very real – but only because multiple mechanisms exist and are transparent.
For instance:
- In South Australia, the 150 MW/194 MWh Hornsdale Power Reserve has generated substantial financial results through frequency control and energy trading. During periods of high prices, the system earned strong returns by arbitraging and stabilising the grid, contributing significantly to Neoen’s reported battery profits.
- European markets often combine ancillary contracts, capacity payments and arbitrage. Some German and UK projects achieve complex stacked revenues with ancillary services contributing meaningful portions of income alongside arbitrage and capacity products.
- In specific US markets like ERCOT and CAISO, batteries earn an average of ~$2.7–$3.0 per kW‑month through combined arbitrage and ancillary streams — and the mix of revenue sources can shift dramatically over time based on price volatility and service demand.
These cases illustrate that revenue stacking works where markets reward flexibility with clear price signals and multiple products.
Why the Stack Fails
In immature markets, many revenue mechanisms are either underdeveloped or absent. Spot pricing may not fully reflect grid scarcity. Balancing markets are limited, and ancillary service remuneration is poorly defined. Capacity payments often have unclear eligibility criteria, and congestion monetisation is difficult without locational pricing. As a result, a BESS may technically provide flexibility, but without market recognition, those services generate little to no revenue.
The Role of Market Design
A functional revenue stack requires robust market design. Intraday markets, transparent pricing, and clearly defined ancillary service products are essential. In South Africa, current market reforms under SAWEM aim to introduce these mechanisms, but gaps remain. Without proper rules, batteries operate primarily as infrastructure rather than dynamic trading assets, and projected revenue streams collapse.
Dispatch Intelligence Matters
Even when multiple revenue streams are available, extracting maximum value is complex. Dispatch strategies must factor in degradation, round-trip efficiency, and forecast errors. Without intelligent algorithms, revenue can drop dramatically, especially under curtailment or operational constraints. Simple arbitrage-focused operation may seem profitable short-term but will undermine long-term asset health and cash flows.
Structural Implications
Investors often overlook the invisible infrastructure needed for revenue realisation.
Real-time telemetry, automated dispatch, and settlement systems are as critical as the battery hardware itself. Without these systems, the promise of stacked revenue remains theoretical, creating investment uncertainty and higher cost of capital.
In emerging markets, the absence of:
- Fully defined ancillary products
- Transparent intraday markets
- Congestion pricing signals
- Automated settlement systems
means that batteries often cannot stack revenues in the manner financial models assume.
The Takeaway
In immature markets, the multi-revenue promise of batteries is an illusion unless market rules, data, and operational intelligence evolve concurrently. Policymakers must recognise that stacking revenue streams requires enforceable frameworks and dispatch sophistication. Otherwise, South Africa and the rest of the world risk deploying batteries that cannot realise their full financial or operational potential. The revenue stack is not automatic – it is earned through market design, transparency, and intelligent operation.