Decarbonising price formation: unit-level evidence on battery storage and the imbalance price in the GB Balancing Mechanism
Abstract
Renewables now dominate Great Britain's generation mix but rarely occupy the marginal price-setting position, which raises the question of which flexible technologies translate a renewable-rich system into real-time price formation. This study reconstructs the price-ranked edge of the eligible bid or offer stack in the GB Balancing Mechanism across 50,684 half-hourly Settlement Periods from 2023 to 2025 and attributes it to individual Balancing Mechanism Units, separating long-system bid-active from short-system offer-active conditions and retaining co-marginal ties. Batteries rose from 0.8% to 36.2% of bid-active and from 3.2% to 26.9% of offer-active marginality, displacing combined-cycle gas on the bid side and pumped storage on the offer side. Capacity-normalised marginal capture rose on both sides, and unit-quarter fixed effects show that an additional 100 MW of Balancing Mechanism active capacity was associated with a 0.55 and 0.48 percentage-point increase in quarterly bid- and offer-side marginal share. By 2025, battery actions were around £9 to 10/MWh more favourable than volume-matched non-battery alternatives drawn from the same ladder, yet batteries were under-represented by 12.9 percentage points in the highest-priced 5% of short-system periods. Individual batteries remain consistent with price-taking, while the fleet has become endogenous to routine balancing price formation.
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BibTeX
@misc{dalton2026decarbonising,
title = {{Decarbonising price formation: unit-level evidence on battery storage and the imbalance price in the GB Balancing Mechanism}},
author = {Robert Dalton and Aidan O'Sullivan},
howpublished = {arXiv},
year = {2026},
month = aug,
doi = {10.48550/arxiv.2608.29818},
eprint = {2608.29818},
archivePrefix = {arXiv},
url = {https://arxiv.org/abs/2608.29818},
note = {CC BY 4.0},
}
RIS
TY - UNPB
TI - Decarbonising price formation: unit-level evidence on battery storage and the imbalance price in the GB Balancing Mechanism
AU - Robert Dalton
AU - Aidan O'Sullivan
PY - 2026
DA - 2026/08/30
PB - arXiv
DO - 10.48550/arxiv.2608.29818
UR - https://arxiv.org/abs/2608.29818
AB - Renewables now dominate Great Britain's generation mix but rarely occupy the marginal price-setting position, which raises the question of which flexible technologies translate a renewable-rich system into real-time price formation. This study reconstructs the price-ranked edge of the eligible bid or offer stack in the GB Balancing Mechanism across 50,684 half-hourly Settlement Periods from 2023 to 2025 and attributes it to individual Balancing Mechanism Units, separating long-system bid-active from short-system offer-active conditions and retaining co-marginal ties. Batteries rose from 0.8% to 36.2% of bid-active and from 3.2% to 26.9% of offer-active marginality, displacing combined-cycle gas on the bid side and pumped storage on the offer side. Capacity-normalised marginal capture rose on both sides, and unit-quarter fixed effects show that an additional 100 MW of Balancing Mechanism active capacity was associated with a 0.55 and 0.48 percentage-point increase in quarterly bid- and offer-side marginal share. By 2025, battery actions were around £9 to 10/MWh more favourable than volume-matched non-battery alternatives drawn from the same ladder, yet batteries were under-represented by 12.9 percentage points in the highest-priced 5% of short-system periods. Individual batteries remain consistent with price-taking, while the fleet has become endogenous to routine balancing price formation.
ER -