Teet Kukk, Founder and CEO of Soleron Energy
Owners of energy storage solutions frequently hear one question. How much revenue did your battery generate last month?
The question seems simple. The answer often is not.
The energy storage market talks constantly about reserve market revenues, arbitrage and optimizing solar consumption. At the end of the month, the figure presented to the battery owner can look quite impressive.
But is that gross revenue or actual net profit? Does it account for the electricity purchased to charge the battery, energy losses, grid fees, balancing costs and battery degradation? Most importantly, do we know what would have happened without any active management?
When a company invests hundreds of thousands of euros into batteries, solar parks and energy management, they deserve clear answers. The problem is not a lack of data. On the contrary, there is too much of it. Revenues, energy costs, grid fees, battery losses, degradation, reserve market results, solar self consumption and portfolio balancing impacts might live in completely different systems. They are often calculated using different methodologies.
The leaking grain silo
Imagine a large grain silo. Grain is constantly poured in from the top. Every new sack is weighed exactly and recorded. At the end of the day, all the added quantities are summed up, and a fantastic result is reported.
However, there are several small holes at the bottom of the silo. Ten kilograms spill out of one hole. Five fall out of another. Some leaks are obvious, while others are slow and almost invisible.
If we only measure what is poured in from the top, we never truly know how much grain remains in the silo at the end of the day.
Energy management works the exact same way. Reserve market revenue, arbitrage profit and other market earnings are the grain we pour in. At the same time, we must calculate the exact cost of generating that revenue. How much electricity was needed for charging? How much energy was lost? What were the grid and market fees? How much of the limited battery lifespan was consumed? Did the optimization create additional costs elsewhere?
Seeing only the gross revenue does not tell us if the asset owner actually became richer or what the final net result was.
Efficiency and battery degradation are real costs
Consider a 1 MW / 2 MWh battery with a round-trip efficiency of 90%. Simply put, out of 100 MWh of energy used to charge the battery, not all of it will return for use. About 10% is lost. A portion of the energy is lost during conversion and dissipates as heat.
Because of this, calculating arbitrage requires more than just comparing the electricity price during cheap and expensive hours. You must look at the complete energy balance, pinpointing exactly when the charging energy was purchased and what fees applied to it.
The same logic applies to the reserve market. An activation might change the state of charge. After activation, the battery often needs to be recharged to the required level. That also comes with a price tag. The fee received from the market and the actual value created for the owner are not necessarily the same thing.
Another less visible component is battery degradation. If the cost of a 2 MWh battery is around 189€/kWh, the total investment is approximately 378 000€. Even if technical specifications suggest 8000 cycles, you cannot simply divide the investment by 8000 to find the true cost of a single cycle. Aging is affected by depth of discharge, temperature, charging and discharging power, state of charge ranges and simple calendar aging.
The core principle is simple. Using a battery is never free. If a specific management strategy generates revenue today but disproportionately consumes battery life to do so, the optimization logic must account for this. The owner must see this cost when evaluating the results. Degradation might be an estimated cost in the report, but the methodology and assumptions used must be completely transparent.
What would have happened without management?
Let us say a company operates a 1.3 MWp solar park and a 1 MW / 2 MWh battery. At the end of the year, the management system claims that a significant amount of value was created through solar self-consumption, arbitrage, the reserve market and demand response.
But how much of that was actually driven by the active management?
The solar park would have produced electricity even without optimization. The company would have consumed a portion of that production on site anyway. In some cases, the battery might have operated on a simple local control logic.
This is why a reliable baseline is critical. You must know what would have happened during the exact same period without optimized management. Only the difference between the actual result and this baseline scenario shows the true added value created by energy management.
This is not just a technical detail. It determines exactly what the asset owner is paying the service provider for
One euro should not be in two places at once
Managing energy across multiple markets creates another major challenge. The same value must never be counted twice.
If solar energy was stored in the battery, used locally during an expensive hour and successfully prevented the purchase of grid electricity, the resulting value needs a clear definition. Should it be recorded as arbitrage, increased solar self consumption or avoided purchase costs? All three descriptions might seem correct, but you cannot add that same euro to the total result three times.
The same rule applies to battery capacity. If one megawatt is reserved for a specific service at a given moment, it must be completely clear to what extent that same resource can participate in another market simultaneously.
Accounting becomes even more complex when the battery is part of a larger portfolio. The deviation of one client might perfectly offset the opposite deviation of another client. This portfolio netting creates real savings. The question is how that financial value is attributed and paid out to the specific asset owner.
The entire point of multi-market optimization is to make a single asset perform the most valuable work possible at any given second. The point of reporting must be to prove exactly what work the asset did, what the net result was and what the alternative would have been.
Energy management should not be a black box
This brings us directly to market transparency. The asset owner must be able to view the underlying data used to calculate their revenue and savings.
If a client only sees a final monthly number generated by the service provider, they cannot independently verify the result. They are completely blind to the underlying measurement data, market transactions, activations, energy balance and calculation methodology. This becomes especially critical when the same battery participates in multiple markets simultaneously or belongs to a larger aggregated portfolio.
A modern report must start with the net result and allow the user to drill down all the way to the raw data. The owner should see revenues and savings separately. This includes the reserve market, arbitrage, solar self-consumption, peak shaving, demand response and portfolio netting. It must also clearly separate the costs and losses incurred to create those revenues.
These include the energy used for charging, round-trip efficiency losses, grid and market fees, balancing costs, degradation and any other agreed cost components. Alongside this, there must be a third view showing what the result would have been without optimized management.
A gross revenue of 10 000 euros does not automatically equal 10 000 euros in profit for the owner
The electrical grid is moving rapidly toward distributed generation, storage, demand response and simultaneous multi-market utilization. As management becomes more complex, transparency becomes increasingly vital.
You cannot expect an owner to blindly trust a single number sent to them at the end of the month simply because a complex algorithm calculated it. They must understand exactly where that number came from, and they must have the tools to verify it.
This is why the next phase of energy management is not just about better forecasts and smarter optimization algorithms. Standardized and auditable accounting is equally important. We need clear definitions for revenue, savings, costs, energy losses, degradation and baselines.
The results of energy management should never be taken on blind faith. They must be verifiable
Because at the end of the day, it does not matter how much grain we poured into the silo. The only thing that matters is how much is actually left after all the leaks.
