BESS Arbitrage: Throughput, Degradation and Net Spread

AI-generated editorial illustration; it does not depict a verified project, actual prices or chart data.

1. Economic decision

The useful spread is not selling price minus charging price. A battery buys more MWh than it sells, consumes cycle life and may face fixed operating costs even when idle. Dispatch only when incremental revenue covers charging losses, wear and settlement charges. Positive dispatch margin still does not prove that the asset repays capital.

2. Evidence and dates

World Bank records TTF gas at 21.11 USD/MMBtu in August and 25.42 in September 2026. Fuel volatility can change electricity spreads, but these gas values cannot establish a battery spread. The EIA October 6 forecast, cut off October 1, places annual 2026 US wholesale power at 52 USD/MWh; annual averages remove the hourly differences arbitrage needs. The DOE storage assessment distinguishes charging, replacement and lifecycle costs; it is methodological evidence, not a 2026 vendor quote.

3. Cost boundary

Use AC-meter round-trip efficiency, so transformer and converter losses are included once. This illustrative one-year nominal USD model excludes tax, capital recovery and financing. Wear reserve is a hypothetical economic allowance per discharged MWh, not a measured universal degradation rate. Fixed operating expense is separate. Do not count the same replacement expenditure again in a lifecycle cash flow without reversing the reserve.

4. Worked calculation

Annual discharge of 5000 MWh at 90% efficiency requires 5555.56 MWh charged. At 50 USD/MWh, charging costs 277777.78 USD. Selling at 100 USD/MWh earns 500000 USD. Wear allowance of 18 USD/MWh costs 90000 USD; fixed operating expense is 67777.78 USD. Annual dispatch margin is 500000 − 277777.78 − 90000 − 67777.78 = 64444.44 USD. The variable dispatch threshold is 50 / 0.90 + 18 = 73.56 USD/MWh, before any settlement fee.

5. Sensitivity

Selling prices of 80, 100 and 120 USD/MWh produce annual margins of −35555.56, 64444.44 and 164444.44 USD at unchanged throughput. The fixed-cost-inclusive threshold is 87.11 USD/MWh. At 85% efficiency, charging the same discharge costs 294117.65 USD, reducing the base margin to 48104.57 USD. More cycles are valuable only when each added cycle covers its own marginal wear and energy cost; unavailable high-price hours cannot be assumed repeatable.

Illustrative annual discharge 5000 MWh, charging price 50 USD/MWh, 90% efficiency, wear reserve 18 USD/MWh and fixed operating cost 67777.78 USD. Capital and financing excluded.

6. Contract and operating evidence

Request warranted usable energy, cycle and calendar limits, temperature restrictions, auxiliary consumption and augmentation schedule. Tie warranties to the proposed dispatch depth and charging rate. Reserve grid capacity and check whether charging attracts network fees. Ancillary-service revenue requires its own availability obligations; do not add its maximum revenue to full arbitrage revenue if both use the same capacity during the same hours.

An augmentation plan should specify when capacity is restored and whether the replacement is already funded by the wear allowance. Dispatch optimization needs a state-of-charge path, not just an annual energy total: the battery cannot discharge before charging or reserve the same energy twice. Reject a proposed extra cycle if its selling price falls below the marginal threshold even when the annual average margin remains positive.

7. Questions and next steps

Does 90% cell efficiency equal AC project efficiency? No; use matching meter boundaries. Is a wear reserve a cash payment today? Usually not, but it represents future economic consumption. Can a positive annual margin justify procurement? Only after capital, financing and replacement analysis. See the BESS transformer guide and PPA risk guide.

8. Primary references

[1] World Bank October 2026 Pink Sheet

[2] EIA October 2026 STEO

[3] DOE storage cost assessment