Market RadarBESS & Batterijparken
The Business Case for Co-located BESS in Germany: Opportunities and Complexity
Germany faces a growing need for battery energy storage systems (BESS) due to increasing energy market price volatility. Developing BESS projects is complex, but co-location with solar and smart operational strategies can significantly boost revenues. Models indicate that income from wholesale markets and ancillary services, such as aFRR up, are crucial for a profitable business case. Despite uncertainties regarding subsidies and market evolution, BESS is an essential component of the energy transition.
Germany is experiencing a growing demand for battery energy storage systems (BESS), particularly when co-located with solar power projects. The increasing volatility in wholesale electricity prices, characterized by low daytime prices and significant evening peaks, is making the economic case for utility-scale battery storage and hybrid solar-plus-storage projects more compelling. These price spreads present a challenge for standalone solar but simultaneously offer a substantial opportunity for energy storage.
However, developing BESS projects in Germany is inherently complex. The German electricity market involves numerous stakeholders, including four transmission system operators and over 900 distribution system operators. Developers must navigate a complex array of regulations, processes, forms, and fees. Building a robust business case requires careful consideration of factors such as co-locating storage with PV, whether the battery operates as a "Green" or "Gray" system, and the role of frequency regulation markets in the revenue stack.
The mc Advisory team modeled a theoretical 4 MWp solar project in Germany, paired with either a 4 MWh or 8 MWh battery system. Their analysis focused on how battery sizing, co-location, and operational modeling influence potential BESS revenue. Revenues were calculated by optimizing electricity traded on day-ahead and intraday wholesale markets, combined with income from ancillary services and an assumed floor price under Germany’s Renewable Energy Sources Act (EEG).
The modeling results highlight that co-locating solar and storage significantly boosts revenue potential. A standalone PV system generated annual revenues of €250,000 on the spot market and €145,000 under the EEG. Adding an on-site BESS increased spot market revenues to €400,000 and EEG revenues to €155,000, as the battery could charge during low-price periods and discharge during high-priced evening hours. Beyond revenue uplift, co-location offers benefits like reduced capital and operating costs and more efficient use of existing grid connections.
The choice between a "Green" system (charged exclusively from on-site solar) and a "Gray" system (also able to charge from the grid) has a major impact. A 4 MWh Green battery increased annual revenue by approximately 40.5% (€160,000) compared to standalone solar. A Gray system of the same size, with greater arbitrage opportunities, saw a 26.6% (€105,000) increase due to the loss of EEG subsidies. With an 8 MWh battery, the economics shifted: the Green battery showed a 73.4% (€290,000) increase, while the Gray battery, by better exploiting market volatility, achieved an increase of over 79.7% (€315,000), with additional arbitrage offsetting lost EEG revenues.
Revenues from frequency control auxiliary services (such as aFRR up) also proved crucial. For the 8 MWh Gray system including aFRR up, total annual revenues reached €835,000, the highest among all modeled configurations. Although a portion of the battery's capacity is reserved for these services, potentially cannibalizing wholesale revenues, the additional income from aFRR up significantly outweighs this loss, often by a factor of three to four.
Despite the complexities, battery storage is becoming an increasingly essential component of renewable energy project development in Germany. However, the evolution of ancillary services markets, wholesale market volatility, and future subsidy schemes remain key uncertainties. The reported 27% decline in global BESS system costs in 2025 by BloombergNEF further strengthens the economics of battery storage. Building the optimal business case requires ongoing and specialized analysis.
This article is based on an analysis from ESS News.
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