Maximising the Profitability and Operational Efficiency of Grid-Connected BESS Projects
Grid-connected BESS profitability has become a moving target as electricity markets mature at speed. Battery energy storage systems (BESS) are increasingly central to modern grid infrastructure, absorbing and injecting power within milliseconds to keep supply and demand in balance as variable renewable generation grows. This case study takes the perspective of a BESS project developer deciding how to enter grid-connected services in a maturing market while optimising both profitability and operational efficiency.
The Shifting BESS Landscape
The scale of change is striking. Storage capacity, excluding pumped hydro, grew 68 percent between 2021 and 2022, and forecasts point to roughly twelve times more capacity installed by 2030. That growth brings saturation. Governments have been the primary investors through procurement and auctions supporting frequency services such as Frequency Containment Reserve and automated and manual Frequency Restoration Reserve. But these markets crowd quickly. In the UK, frequency services accounted for 80 percent of BESS revenue in 2022 and fell to about 20 percent by 2024. As returns compress in established services, developers must look toward higher-value energy arbitrage and comprehensive frequency services, which carry greater risk.
The Problem for Grid-Connected Developers
Behind-the-meter storage has expanded because it reduces cost exposure for industrial, commercial and residential customers and increases their independence from the grid. Grid-connected systems face a harder financing environment. Uncertain on-demand delivery, fluctuating prices and high operating costs discourage private investment. The developer's task is therefore to improve investment decision-making by identifying which service markets and technical strategies produce the most attractive risk-adjusted returns. Recent blackout events, including the April 2025 disruption in the Iberian Peninsula, have renewed attention on security and resilience, adding weight to the value storage provides.
Revenue Stacking as the Core Strategy
The central idea is revenue stacking: earning from several market streams at once through selective participation. The case describes two optimisation approaches. The horizontal approach treats the whole day as a single block and allocates a share of capacity across markets such as wholesale trading and Frequency Containment Reserve. The vertical approach divides capacity into granular time-bound blocks, for example four-hour slots, allowing more detailed optimisation across market options. Stacking must respect regulation. In the UK, simultaneous participation in certain dynamic frequency services and wholesale arbitrage is not permitted, because the battery may be unable to meet delivery requirements, a risk often tied to inadequate state-of-energy management or the technical strain of cross-market operation.
Service Markets and Their Trade-Offs
The case maps returns against risk across the market categories. Capacity markets are stable and low-risk, offering predictable long-term revenue but attracting high participation. Ancillary services split into frequency dynamic response, which is low-risk but now crowded, and other grid services such as black-start provision, which the team flags as low-risk with lower participation and therefore a potential opening. Energy arbitrage is the most granular and dynamic, operating second to second, offering higher profit but demanding fast response and greater technical mastery, which makes it higher-risk with few capable participants. Four technical capabilities support high-value stacking, including charge and discharge optimisation via arbitrage combined with up and down regulation through active power reserve schemes, underpinned by advanced energy management systems and forecasting tools.
What It Means for the Industry
The lesson is that profitability in grid-connected storage is no longer secured by a single revenue stream. As frequency markets saturate, developers must combine services intelligently, invest in forecasting and control technology, and align strategy with the regulatory limits of each jurisdiction. Emerging areas such as black-start and higher-value arbitrage may offer better returns precisely because fewer participants can deliver them, but they require technical capability, strategic partnerships and regulatory understanding to capture safely.
Key Takeaways
BESS revenue streams shift fast: UK frequency services fell from 80 percent of BESS revenue in 2022 to about 20 percent by 2024.
Grid-connected projects face weaker private financing due to uncertain delivery, price volatility and high operating costs.
Revenue stacking, combining capacity, ancillary and arbitrage income, is the core route to optimised profitability.
Horizontal optimisation allocates capacity across the whole day, while vertical optimisation uses granular time-bound blocks.
Regulatory limits, such as restrictions on combining dynamic frequency services with arbitrage in the UK, constrain stacking.
Black-start and other grid services offer low-risk, low-participation openings that could differentiate a developer.
Higher-value arbitrage rewards fast response and strong energy management systems but carries higher risk and fewer capable players.
Disclaimer: This case study was developed and presented by BatteryMBA participants as part of the Case Study Track. Views, analysis and recommendations are the authors' own. BatteryMBA does not take responsibility for the accuracy or completeness of the content and it should not be relied upon as investment, engineering or legal advice.
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