The Strongest European Markets for Electricity Storage – an Analysis

Market Trend – March 28, 2024

The markets for electricity storage vary strongly from one European country to another. Different market designs, business models and incentive schemes mean that there is no such thing as a European storage market. According to the EU’s plans, the reform of the Electricity Market Design (EMD), should change all that over the next few years.

Until January 2025, and then every two years, regulators in the Member States will be required to assess the need for flexibility in the electricity system for a five-year time horizon. The potential of non-fossil energy storage and demand side response for covering the demand is to be included both for transmission and distribution.

So while the national electricity markets are set to become more harmonized, it’s worth taking a look at the different market sectors and to analyze their development in the past and in the medium-term future. Silvestros Vlachopoulos, Senior Analyst at LCP Delta, a British market research company, took that approach in a webinar at the beginning of March.

His reference point was 10.1 gigawatts (GW) of newly deployed storage capacity in Europe in 2023 – a new record. Of this capacity, 2.8 GW are attributable to front-of-the-meter (FOM) energy storage systems, which are directly connected to the utility grid system and provide grid services.

Behind-the-meter (BTM) energy storage, on the other hand, is installed on the consumer’s side of the meter and optimizes the self-consumption of private households, commercial operations and industry, reducing their dependence on the grid. Last year, around 7.3 GW of new capacity was deployed in this market segment.

FOM market shows slow growth – with Italy standing out

According to the recent European Battery Markets Attractiveness Report published by Aurora Energy Research, the UK, Italy and I-SEM (the wholesale electricity market for the island of Ireland) were the three European markets with the heaviest investments in FOM battery storage systems in 2023. These leading regions benefit from strong political support, solid spreads and capacity market remunerations that give investors long-term security.

LPC Delta backs this view by predicting the continued growth of the British FOM market until 2026, followed by a slow decline to around 2,000 MW towards 2030.

For Italy, LPC Delta predicts very strong growth of the FOM segment for the time period from 2026 to 2030 – maybe the strongest growth in Europe.This growth will be driven by the Mechanism for the Acquisition of Storage Capacity (MACSE), which is to offer guarantees for both investment and operating costs, and generate 9 GW. The Irish market is set to continue its slow but steady growth until 2029 at least.

According to Aurora, Germany, Spain and Greece will see new market opportunities, where special auctions for battery storage systems have led to at least 1.8 GW being deployed so far. Auctions could lead to more than 15 GW being deployed across Europe by 2030.

The duration of storage has increased to two hours over the last few years, and some projects that can manage four hours have been announced. This means that systems for more than 10 megawatts (MW) will become suitable for a wider range of applications, generating additional market volume for FOM storage systems. Co-location projects, i.e. the combination of several renewable energy and storage systems behind a single grid connection point, are becoming more prevalent.

Germany still at the top of the BTM market

For Germany, the largest European market, LPC Delta predicts continued growth for the BTM sector until 2030, albeit slower than the record growth of 2023.

Thanks to generous incentive schemes, the Italian BTM market grew fast in 2022, and was still in second place in 2023. With the phasing out of the Superbonus, the Italian residential market is expected to slow between now and 2026, without the prospect of recovery until 2030.

The Dutch market, by contrast, is expected to grow substantially, in line with a generally strong growth in other European countries.

Both market segments, BTM and FOM, will continue to benefit from a drop in storage system prices. An influx of lithium and new, lithium-free storage technologies will further ease off the price pressure.

With additional countries catching up in terms of FOM and BTM growth, LPC Delta predicts that the storage capacity deployed across Europe will grow sixfold by 2030,

Aurora Energy Research even predicts sevenfold growth.

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