Batteries in a Constrained World: Evaluating Grid Constraints for BESS Projects (Part 3)

Introduction & Recap

In this mini-series, we have explored how grid constraints impact Battery Energy Storage Systems (BESS) and how to evaluate their financial and operational implications.

• In Part 1, we laid the groundwork by understanding BESS dispatch behavior and the key steps to assessing grid constraints.
• In Part 2, we examined our first real-world case: a BESS project near the Alps affected by snow cannon operations. This case study demonstrated that despite seasonal constraints, a viable business case remained possible due to the mitigating effect of seasonality and careful project structuring.

In this third part, we analyze a scenario where grid operators impose a maximum of 1,000 constrained hours per year. Unlike in our previous example, where constraints had a limited financial impact, this case poses a greater challenge to BESS feasibility.

We highly encourage our readers to first read Part 1 and Part 2 as this part builds on the concepts introduced in Part 1 & 2.

Case Study II: Curtailment of up to 1000 Hours

Recently, we have seen many grid operators imposing increasingly strict constraints. A common example:

• Timing: The 1,000 highest-load hours in the year are fully curtailed. Curtailment is applied in 15-minute increments, affecting the highest 4,000 15-minute intervals.
• Extent: Discharging is prohibited across all markets during these periods.
• Communication: The restricted hours are communicated 2 days in advance, allowing some operational planning.
• Compensation: No financial compensation is provided for the restricted days.

This type of limitation is often introduced in areas with high renewable generation, where grid operators seek to avoid excessive grid stress during peak periods. But how does this constraint impact a BESS business case? Let’s apply our framework to analyze its implications.

Step 1: Identifying the Affected Hours

To assess the impact, we must first determine which hours are likely to be constrained. This depends heavily on the local renewable generation mix. We examine three scenarios:

1. PV-dominated region → Peak curtailment primarily in summer months
2. Wind-dominated region → Peak curtailment primarily in fall and winter months
3. 50/50 Mix of PV & Wind → More evenly distributed curtailment throughout the year

Key Takeaways

• PV-heavy regions experience most constraints in summer, when solar generation is at its highest.
• Wind-heavy regions face constraints mainly in fall and winter months, when wind production peaks.
• A balanced mix of PV and wind leads to a more spread-out curtailment profile across the year.

These variations are crucial for investors and developers when assessing the financial impact of such grid constraints.

Step 2: Quantifying the Financial Impact

A natural question: Is this similar to a co-located BESS? While it may seem comparable, there are three key differences:

Total Curtailment vs. Partial Curtailment

• In a typical co-located project, the BESS can still use part of the available grid capacity if the renewable asset isn’t fully utilizing it.
• Under this grid constraint, however, the BESS is fully curtailed during the selected 1,000 hours—regardless of how much capacity is available (assuming the grid operator makes use of their right to constrain all 1,000 hours).

Forecasting Uncertainty Eliminated

• In co-location, forecasting errors impact the ability to optimize grid usage. BESS operators must conservatively estimate available grid capacity, especially for markets with gate closures far ahead of delivery (e.g., FCR).
• In this grid constraint scenario, the operator provides 2-day advance notice, removing forecasting uncertainty and allowing more precise operational planning.

Impact on Different Renewable Types

• PV is typically a better fit for co-location due to predictability and complementary market opportunities.
• However, in this constrained scenario, PV suffers a greater revenue impact than wind—a surprising result driven by market design and operational restrictions.

Let’s look at the financial results:

Why is the Impact Higher for PV?

Many assume that BESS works better with PV than wind, given the highly complementary operational profile of BESS and PV. However, in this case, PV sees a higher revenue loss than wind. Let’s understand why this is the case:

Load Utilization Difference in Co-Location vs. Grid Constraint Change The Role of Production Profiles

• In a co-located project, wind assets tend to utilize more of the grid connection due to higher average generation levels.
• Under full curtailment, both PV and wind face the same effective restriction (1,000 hours).
• Once the 1,000 restricted hours are reached, curtailments no longer apply. Since wind generation tends to maintain higher output levels even beyond this threshold, the Wind scenario benefits more from unrestricted access than PV.

The Seasonal Difference of Affected Hours Impacts Markets Differently

The revenue impact differs across markets:

FCR Revenues Are More Affected in PV Scenarios:

• FCR operates in fixed 4-hour blocks—if one 15-minute interval within a block is curtailed, the entire block is lost.
• Since PV-driven curtailments happen mostly midday in summer, they disrupt high-value FCR blocks more than wind-driven curtailments in winter, which tend to fall into lower-value periods.

Intraday & aFRR Revenues Are Less Affected:

• Since these markets rely on short-term price volatility, they remain equally accessible under both PV and wind curtailment scenarios.
• BESS can still react dynamically to market signals outside of the curtailed windows.

Day-Ahead Revenues Decline More for Wind-Constrained BESS:

• PV generation dictates price signals in the Day-Ahead market; therefore, BESS rarely discharges during hours of strong PV production based on Day-Ahead positions.
• Given these inherent complementary operational dynamics, Day-Ahead revenues for the PV scenario are almost unaffected.

Step 3: Evaluating Business Case Feasibility

Given these effects, how severe is the financial impact?

• Revenue losses are in the low double-digit percentage range—a significant effect, but not necessarily a dealbreaker.
• However, an important caveat: Grid operators may not always use the full 1,000 hours. In solar-dominated cases, curtailment often occurs at load levels below 50% of capacity, meaning actual restricted hours could be lower than planned.
• Grid operators may restrict fewer hours in the PV scenario than in the Wind scenario, further reducing the expected impact.

This means that while the business case is weakened, it is not always completely unviable. However, uncertainty around how aggressively grid operators use these restrictions adds a risk factor that must be carefully evaluated.

Summary & Final Takeaways

In this third and final part of our mini-series, we analyzed a stricter grid constraint scenario—a limit of 1,000 fully curtailed hours per year—and assessed its impact on BESS feasibility. Compared to our previous case study, where seasonal constraints had a limited financial impact, this scenario posed a more significant challenge to battery operations and revenue generation.

Key Insights from Part 3

• A 1,000-hour grid restriction significantly reduces revenue but does not necessarily eliminate the business case.
• PV-driven constrained BESS experiences a greater revenue loss than wind-driven constrained BESS, due to the structure of FCR bidding and the alignment of curtailment periods with high-revenue hours.
• Market participation varies in its sensitivity to curtailment: FCR is particularly affected, while DAA, aFRR and IDC markets remain largely accessible.
• Grid operators may not always use the full 1,000-hour limit, meaning the actual financial impact could be lower than modeled worst-case scenarios.

This analysis highlights the importance of in-depth scenario modeling when assessing grid constraints. While revenue losses are in the low double-digit percentage range, investors and developers must consider additional risk factors—such as the uncertainty of how grid operators enforce constraints and the potential for constraints to change over time.

Disclaimer: Since PV and wind production are highly location-dependent, these results should serve as a framework rather than a universal rule for assessing constraints.

Final Remarks: The Importance of Proactive Grid Constraint Management

Throughout this series, we have demonstrated that grid constraints come in many forms—ranging from seasonal limitations with manageable financial impact (as seen in Part 2) to more severe curtailments that challenge business case viability (as explored in this article).

As renewable penetration increases, grid operators are likely to introduce more complex and dynamic constraints. This means that:

• Developers and investors need to anticipate grid constraints early in project planning to ensure long-term profitability.
• BESS operators must develop flexible optimization strategies that account for varying levels of market participation restrictions.
• Regulatory discussions will play an increasing role in shaping BESS economics, making engagement with DSOs and TSOs crucial.

Looking Ahead: What’s Next for BESS & Grid Constraints?

While this series focused on assessing constraints under today’s market conditions, future developments—including capacity market reforms, local congestion management schemes, and evolving ancillary service structures—will further shape BESS participation.

At Entrix , we continuously track and analyze market trends, regulatory changes, and grid flexibility challenges to support developers and investors in making informed decisions.

?? Are grid constraints affecting your BESS project? Let’s discuss—book a meeting with us today.