How it works
The battery management system cannot measure stored energy directly, so it estimates SoC from the cells' voltage, the current flowing in and out, and temperature. Counting current over time, called coulomb counting, gives a running total but drifts as small errors add up. The voltage of a resting cell maps to a charge level and corrects that drift. Lithium iron phosphate cells have a flat voltage curve in their middle range, so the estimate there is less certain and needs periodic recalibration with a full charge or discharge.
Operators set an SoC band, for example 5% to 95% or 10% to 90%. Running cells to the extremes speeds up wear and raises safety risk. The energy between the band's limits is the usable capacity that dispatch plans can rely on. The controller also reserves part of the band for services. A battery that must be ready to give frequency response in both directions needs headroom above and below its current SoC.
Why it matters
SoC is the battery's position at any moment, and every dispatch decision starts from it. A battery that empties at 6 pm has nothing left for a price spike at 9 pm. A wrong estimate can lead to a missed commitment and a penalty. The band also decides how much of the nameplate MWh can actually be sold, so it belongs in the financial model from the first draft.
A worked example
Take a battery whose SoC percentages use 100 MWh as the reference capacity, with a 10% to 90% operating band. The energy within the band is (90% − 10%) × 100 MWh = 80 MWh. At 70% it holds 70 MWh on that basis, of which 70 − 10 = 60 MWh is above the floor. Reserving 40 MWh leaves 20 MWh for other dispatch. These are stored-energy figures; conversion losses and auxiliaries must also be allowed for when committing energy at the grid meter.
Illustrative figures.
Across markets
In some US markets, such as California's, the system operator tracks each battery's SoC in its market software and dispatches it within those limits. In Europe and India, the owner usually manages SoC and bids or schedules around it. European frequency reserve products typically require the owner to show that the battery can sustain its committed power for a set duration, which fixes how much of the band must stay in hand.