When energy is cycled, some of it is lost in the form of heat or other factors. When calculating the value of a TB2, this loss must be factored in.

To do this, we calculate a roundtrip efficiency, which measures the amount of energy that can be discharged by the BESS asset compared to the amount of energy that was originally stored in it. For example, a BESS asset with 100MW capacity and 90% roundtrip efficiency may charge 100MWh but only be able to discharge 90MWh. In other words, the roundtrip efficiency describes how much of the energy charged (bought from the grid) will be able to be discharged (sold back to the grid later).

Accounting for roundtrip efficiency directly discounts the value of the energy arbitrage. For example, if the price to charge was $15/MWh and the price to discharge was $20/MWh, then one might think that the BESS asset makes $5/MWh on arbitrage. However, in reality, this BESS asset must charge more energy than it is able to discharge due to its roundtrip efficiency being less than 100%. Assuming the BESS asset’s capacity is 100MW and the roundtrip efficiency is 90%, the asset would have paid $1,500 to charge (100MWh * $15/MWh) and sold the energy for $1,800 (100MWh * 90% roundtrip efficiency * $20/MWh). The resulting value of that arbitrage would be $3/MWh ($1,800 - $1,500 / 100MWh).

RenewaFi assumes an 86% roundtrip efficiency, which is the average roundtrip efficiency for BESS bids and offers in the marketplace as of July 2024.