Impact of Market Design on Battery Trading Strategies: A UK Case Study

The integration of large-scale battery energy storage systems in power grids is expected to increase in the coming years to compensate for the growing variability of production and consumption. In this context, the market design must provide the correct incentives for these storage systems to participate. In this paper, we analyze the impact of the UK market design and its recent reforms on the trading strategy of a battery. A mixedbinary linear program to compute the optimal hindsight trading strategy was developed to quantify inefficiencies in the market design. The multi-market model considers the available markets, including wholesale, frequency response and balancing markets. Of particular relevance to battery trading in a multi-market setting is the cost of battery degradation, which was also directly incorporated into the model. We perform a case study using real market and system data for 2023. The results reveal that the balancing market was not sufficiently attractive for batteries due to low dispatch rates. As a consequence, trading strategies were employed that harmed both the system and the battery. Based on these results, we highlight the importance of accounting for degradation in trading models and introducing an availability payment for the balancing market.