Large-scale storage systems are the backbone of a flexible, reliable and renewable energy system. ees Europe 2025 revealed some clear trends: Europe’s demand for high-performance storage systems is seeing exponential growth, the number of connection requests is reaching record levels, and the market is quickly becoming more structured.
The increasing volatility in electricity markets and changing regulatory frameworks are creating enormous economic opportunities for storage projects. This article sheds light on key topics that were most relevant at ees Europe 2025 and its accompanying conference. These topics include market opportunities, contract models and areas in need of political action.
Over 50 percent of the European power mix comes from renewable energies. As this share continues to grow, so are the challenges for the energy system in terms of system integration. This development has led to an increase in the number of hours with electricity prices of zero or below in the wholesale electricity market, as seen in Germany, Ireland, and Spain. The apparent lack of flexible resources to balance supply and demand in these countries highlights the urgent need for large-scale storage systems. Such systems are a key flexibility resource as they buffer oversupply, stabilize grids and create economic value in increasingly volatile markets.
The market is responding: According to Anna Darmani, Energy Storage Analyst EMEA at Wood Mackenzie, the installed battery storage capacity of 34 GW in 2024 is to rapidly increase over the next ten years. Large-scale storage projects are gaining traction, driven by new marketing models that make them bankable. Darmani also believes that battery storage is entering a new phase in Europe: “In the current market, diversifying revenue streams is becoming increasingly important. This can be achieved through new contract models, such as tolling agreements and hybrid PPAs, which are being formed throughout Europe. They are essential for reducing merchant risk and making large-scale battery storage systems attractive to investors in Europe,” she explained.
Hybrid PPAs are power purchase agreements that typically combine solar with battery storage, making it possible to store electricity during redispatch or when prices are negative, and to sell it later at a higher market price.
A pioneering example of new contract models is the tolling agreement – the first of its kind in Europe – between British utility company Octopus Energy and Gresham House, a British asset manager with a focus on sustainable and alternative investments. As part of the agreement, Octopus Energy hires Gresham’s batteries, manages the market operations and earns trading profits in the process, while Gresham receives a stable income. This approach shifts the market risk to the off-takers, making the project much more attractive to investors.
Given that previous revenue strategies can quickly lose their profitability, the shift toward diversified revenue models is a logical response. Early BESS projects, especially in Germany and the UK, initially produced high yields through system services such as frequency control and automatic secondary control. Frequency control automatically and immediately stabilizes the power line frequency, balancing short-term variations between power generation and consumption. After frequency control, the automatic secondary control kicks in and regulates the output within a few minutes to further stabilize the power line frequency and restore balance to the power system. Due to decreasing prices and growing competition, this market remained small and quickly became saturated.
At the ees Europe Conference, Simon De Clercq, Senior Research Associate at Aurora Energy Research, provided an example from the Belgian market to illustrate this development. “System service revenues plummeted after a single 4-hour large-scale storage system was connected to the grid. The supply far exceeded the demand in the electricity balancing market. This case demonstrates the volatility of single revenue streams and the importance of adopting a multi-market strategy.”
In response to the increasing risk involved in single revenue streams, hybrid offtake models are gaining importance, Darmani continued to explain. Though they are still at an early market stage with around 15 contracts across Europe, by combining different marketing options, these contract models aim to create wider and more resilient revenue streams for storage systems. Today, typical types of contract include optimization agreements with profit sharing, in which distributors market the storage systems and share the profit with the owners, as well as tolling agreements.
The most advanced type of contract, however, are hybrid PPAs. In Germany, current regulations are boosting this trend. When negative electricity prices persist for extended periods, new subsidy conditions render feed-in less profitable, making the combination of renewable energy systems with storage systems financially more attractive. Hybrid offtake structures create a better balance between steady revenue and market-based return potential – a key factor for the next large-scale storage projects when it comes to bankability and attracting investors.
A central question regarding the continued ramp-up of large-scale storage systems is how to combine stable revenue streams with the opportunities and risks of the free electricity market in order to enable investments and efficiently mobilize capital. This is where releasing BESS capital through a smart mixture of security and return potential comes in.
Batteries thrive in volatile energy markets – this is where they can unlock their full potential. However, this volatility deters lenders and infrastructure investors, who bank on predictable and contractually guaranteed revenue. The challenge is that the market structure has been offering only few bankable offtake models, particularly for systems under 20 MW which barely have any access to long-term offtake agreements. What’s more, marketing in the free market is complex, requiring expertise and sophisticated optimization – an investment risk that many investors are reluctant to take.
Mikko Preuss, Vice President Strategy and Commercial at Terralayr Germany, explained how his company addresses this challenge at the ees Europe Conference. Using a two-sided flexibility platform and standardized general agreements, Terralayr connects BESS systems with various off-takers, including utilities, independent electricity producers (IPPs) and industrial companies. This model allows stable revenue to be combined with market-based value creation through contractual components – thereby unlocking capital for new large-scale storage projects and increasing the bankability of investments.
For example, Terralayr recently entered into multi-asset tolling agreements with Vattenfall that cover multiple plant pools. This is one of the first successful implementations of such a model in Europe. It proves that scalable, bankable models are not only possible in theory but have already been put into practice, bridging the gap between the investor’s requirements for stability and the operational reality of BESS in volatile markets.
Despite political signals and an increasing willingness to invest, integrating large-scale storage systems into the German energy system remains a balancing act between technical necessity and regulatory reality. The demand for flexibility in our electricity system is increasing rapidly. However, new conflicts of goals are emerging due to restrictive local grid specifications – especially in areas where the deployment of renewables is already well underway.
This conflict is particularly evident in Germany, where large-scale battery storage systems are transitioning from niche applications to grid-relevant infrastructure. Political measures such as Section 118 of the German Energy Industry Act, which exempts storage systems installed between 2008 and 2030 from the grid usage fees, have made numerous projects financially viable. But growing systemic reservations are slowing deployment: In PV-rich regions like Bavaria, restrictive grid connection requirements only allow storage systems to be charged or discharged at certain times, cutting revenue by up to 30 percent. Although these specifications are intended to protect the grid, they are threatening to slow the ramp-up of much-needed flexibility options.
At the ees Europe Conference, Benedikt Deuchert, Head of Business Development and Regulatory Affairs at Kyon Energy, emphasized: “To ensure that battery storage systems support the grid rather than stress it, we need an intelligent integration framework. Developers and regulators must abandon rigid specifications in favor of dynamic, demand-oriented controls enabled by real-time redispatch signals and remunerated flexibility services. Flexible connection agreements (FCA) must live up to their name: They should facilitate grid-serving operation, not hinder it. And permanent grid charge exemptions should reward grid-supportive behavior. Only then can BESS unlock their full potential as stabilizing anchors of the German energy system.”