Nord Pool’s new European BESS revenue index ‘reduces trader bias risk’ for merchant plays

To put it another way, the index could help build trust between owners and traders of merchant BESS projects and increase bankability by making projects more attractive to lenders, Clean Horizon CEO Michael Salomon tells ESN Premium.

It could also be used for hedging instruments. The Clean Horizon Storage Index that Nord Pool now delivers comprises indices for the Nordics, Baltics, Central and Western Europe, the Iberian region and the UK. It includes historical data back to 2023.

Trader bias risk and the ‘average’ benchmark

“We actually provide a service to the optimisers themselves,” Salomon says.

Energy storage traders, variously called aggregators, optimisers or route-to-market (RTM) providers across the industry, can also use the benchmark to demonstrate that their performance is consistent with, or better than, the ‘average,’ and to offer their customers greater transparency.

The CEO says that, for example, an asset owner might negotiate a seemingly favourable rate that includes the optimiser’s commission.

However, the customer might perceive a risk that the optimiser will ultimately choose to do more trades for another customer who accepts a higher commission, even if their tradable capacity is lower.

“The route-to-market providers know that’s a risk that their clients perceive. So for them, it’s actually helpful to have a benchmark that they can say, ‘look, here’s the benchmark you can trust.’”

COSMOS was designed to take price forecasts and simulate the trading of a standalone or hybrid energy storage project in a “conservative manner,” to help establish a “reasonable business plan,” Michael Salomon says.

The tool was initially created to predict the revenues of proposed projects, but Clean Horizon realised that by applying the model to past months, it could also show what a theoretical project would have earned.

“That would enable us to provide a benchmark of how much this average trader we’ve created from scratch would have traded if he or she had been the trader last month, so that we could provide a benchmark to compare between asset owners and traders.”

Note that it is not an average of revenues earned in the market by real traders; instead, it is a model of what an average trader could have earned, given market conditions and other factors such as weather and expected variable renewable generation.  

“It’s not an average value of the actual values of the trade. It’s more like a virtual trader with average performance,” according to the CEO.

Salomon says that Clean Horizon is beginning to see some asset owners directly include the storage index in their offtake contracts with traders.  

“As in, I, as a trader, would guarantee you nothing in terms of revenue and therefore my commission,” he explains.

“That being said, I will guarantee you at least the Clean Horizon index of the previous month. It doesn’t take the market risk away. If the market goes to zero, so does the index, but it takes the trader bias risk away.”

“For the trader, it’s not a huge risk, because if they’re good, if they’re not biased, [they know] they will beat the index. And for the asset owners, it’s good news. And for the lender, just one less risk on the project, so it makes it slightly more bankable.”

Salomon adds the caveat that the index is “only useful for the part of the offtake contract that is not under fixed tolling,” in other words, it applies to the merchant revenues available.

Under a tolling agreement, the trader and asset owner contract for a period of, say, 10 years, and the trader puts the asset into the market. In which case, the owner doesn’t have visibility of its market performance nor indeed any contractual reason to.

On the other hand, for fully merchant projects, a floor agreement with a revenue share on top, or a full revenue share, “it becomes useful,” Salomon says.

Modelling assumptions and the duration dynamic

The index is modelled around assumptions including 85% round-trip efficiency (RTE) for all BESS durations and 1.5 cycles per day, Clean Horizon senior consultant Florian Didier says.

“We consider 100% system availability, and the usable energy is calculated based on the rated capacity of the project, multiplied by the duration. For example, if I’m simulating a 50MW project, I multiply it by two and get 100MWh of usable energy.”

As COSMOS obviously doesn’t know the weather from one day to the next, it doesn’t have perfect foresight of prices, but it does have knowledge of day-ahead and ancillary services, and of capacity reservation prices (except for rare peaks).  

The automated frequency restoration reserve (aFRR) and manual frequency restoration reserve (mFRR) prices, meanwhile, are “very uncertain and really dependent on weather conditions,” Didier says. The tool doesn’t have an idea of future prices in these markets, so its battery trading decisions are based on statistical analysis of past data.

The indices include modelling for 1-hour, 2-hour, and 4-hour duration battery systems, as this is largely what is being built in Europe today. Clean Horizon wanted to provide a “broad view of the performance of different durations,” Didier says.

“Revenues available for BESS might vary depending on the general shape of the revenue stack. For example, if you are in a country where your revenues are mainly coming from energy markets, day-ahead, intraday aFRR, mFRR, you name it, you’re going to be performing better with a longer duration battery,” Dider says.

“But if you’re in a country with a higher proportion of ancillary services, with capacity reservation markets, you’re going to be better off with a shorter duration battery.”

Energy-Storage.news‘ free webinar next week, The Impact of Germany’s Ramp Constraints and Grid Limitations on the Energy Storage Business Case, sponsored by Clean Horizon, takes place 2 June 2026 at 11am CEST. This webinar will provide a comprehensive overview of the current grid constraint landscape in Germany, with a focus on what it means in practice for the storage business case.