Dispatch and Optimization
Definition
Dispatch is the hour-by-hour (or minute-by-minute) decision about when an energy asset produces, charges, discharges or holds capacity in reserve. Optimization is the process, usually run by software and a trading desk, that sets bids and offers into energy and ancillary service markets to maximize revenue within the asset's technical limits and contracts. For merchant batteries the optimizer is often a third party, paid a fee or a share of revenue.
Why it matters
The same battery can earn very different revenue depending on who dispatches it and how. A revenue-share optimizer is paid on gross revenue, which can encourage cycling that earns revenue but wears the battery; a fixed fee does not reward performance. Investors should know who controls dispatch, how they are paid, what limits protect the warranty, and what happens if the optimizer underperforms or exits.
Common misconceptions
- •Optimizer revenue forecasts are not guarantees unless backed by a floor or toll.
- •A revenue share aligns the optimizer with gross revenue, not necessarily with battery life or net returns.
- •Grid operator dispatch follows bids; the owner's strategy still decides what is offered.
- •The label is only a starting point. Investor outcomes usually depend on the governing documents, cash-flow priority, valuation policy, disclosure quality, and manager discretion surrounding the term, not just the shorthand definition used in marketing materials.
Technical details
Contract terms to read
Fee basis: fixed, share of gross or net revenue, or floor plus share.
Performance standards: availability, response, cycling caps.
Warranty protections: state of charge, cycle and rate limits.
Trading limits and loss caps set by lenders.
Termination rights and replacement of the optimizer.
How investors apply the term
Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.
The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.
Frequently asked questions
- Who decides when an energy asset buys or sells power?
- The grid operator dispatches resources based on bids, but the owner or its optimizer decides what to bid. In the Marviken battery agreement filed by Nuvve in March 2026, Nuvve as service provider operates the battery in the market for 9% of 'Top Line Revenue,' must maintain market availability above 90% and may not exceed 731 equivalent full cycles a year.
- How are optimizers paid?
- By a fixed fee, a share of revenue, or a floor plus a share. Energy Vault leases its Cross Trails battery to Gridmatic, an 'AI-enabled power marketer' that directs its use, under a 10-year agreement that pays Energy Vault a monthly floor, adjusted for availability and efficiency, plus a percentage of net market revenue above the floors.
- How do lenders limit trading?
- With a risk policy. For the Angela project in Tulare County, California (40 MWac of solar with a 20 MW / 80 MWh battery), financed by SB Energy, day-ahead bids may not exceed the P50 forecast of charge, discharge or production each hour, day-ahead trading stops if losses pass $200,000 in a rolling 90 days, and the project may not sign tolls that grant 'any unaffiliated third party control over the dispatch of the Project.'