Understanding the benefits of adding a battery asset to an existing portfolio

How we helped a client assess the value of adding battery storage to an existing generation portfolio.

The background

We were commissioned to analyse the incremental value of adding battery storage to a client’s portfolio. This analysis was designed to show the benefits of adding battery storage to an existing portfolio, and in combination with other new assets, to assess the impact on the portfolio’s cashflow resilience.

Our solution

The first phase of this work required us to model the revenue streams of the existing and pipeline assets in the client’s portfolio across wholesale and balancing markets. We modelled the assets stochastically under a range of scenarios to provide best estimates, year-to-year volatility and long-term variability in returns. Once this baseline was established we could start incrementally adding battery storage assets to measure the impact on the portfolio.

Each additional MW of battery storage has a different impact on both absolute expected profitability and the range of potential outcomes. We considered several different battery configurations (capacity and durations) to show how these would impact revenue, in order to assess the optimal portfolio mix across the scenarios. Our team presented the results using a range of portfolio analysis methods to quantify the risk and reward of each portfolio package. We used the Efficient Frontier technique to show the risk vs return spectrum for the different portfolio options.

The outcome

The client was presented with easy to digest visuals, alongside the underlying data, to decide what its optimal portfolio would be under different risk/return appetites.