BBDF 2025: Europe’s battery market is still immature
Europe’s battery storage sector is gaining momentum, but fundamentals remain shaky. That was one of the messages from the opening session at the Battery Business & Development Forum in Frankfurt am Main, Germany. The event was co-hosted by pv magazine and ESS News, SolarPower Europe, and Connexio PSE. More than 450 investors, developers, and financiers gathered to discuss strategies, risk perceptions, and how to navigate a market that promises high growth but still lacks stability.
From pipeline dreams to grounded decisions
“There’s still a lot to learn,” said Christoph Ostermann, CEO and co-founder of Green Flexibility. He cautioned that some projects labeled “ready to build” often don’t hold up to scrutiny, frequently lacking grid connection agreements or other essential approvals. “That might be fine for us as developers, but for an investor, it’s a red flag,” he said. The sentiment was widely shared among the audience: Grid connection is the No. 1 bottleneck in many markets, a mini-survey showed.
Tolling: not the silver bullet investors might hope for
As merchant market exposure remains high, some investors have turned to tolling agreements to de-risk their projects. In such contracts, a third-party operator manages the asset for a fixed fee, offering predictable income for the investor. But Ostermann warned against viewing tolling as risk-free: “The tolls you can earn are 50% below merchant prices, and you still keep most of the downside. It’s not extremely attractive in Germany right now, though that might change.”
Robert Pardy of I Squared agreed: “Tolling has to be considered case-by-case. Some smaller developers are getting projects built with very little equity. But that doesn’t necessarily mean they’re getting a return on that equity. At some point, you’re just competing with batteries at lower equipment cost.”
Merchant markets: opportunity or gamble?
In the UK, a more mature battery market, investors have grown comfortable with merchant revenue models. “We’ve gotten used to merchant risk in the UK,” said Loic Cerulus, investment director of CVC DIF. “We’d like to build that comfort in other European markets as well.” He pointed to new market mechanisms like cap-and-floor schemes for long-duration storage as examples of how regulatory frameworks can evolve to support investment.
In contrast, Germany remains more cautious. “Nobody underwriting a merchant battery for 20 years knows what the revenue stack will look like,” said Robert Pardy. The UK, several panelists agreed, could serve as a case study for how continental markets may evolve.
Diversification is good, but only to a point
Cerulus also warned against over-diversification: “There’s value in geographical and technological diversification, but only up to a certain point. Some developers chase pipelines across six or seven countries. That’s a red flag. You need to be strategic about it.”
His own firm prefers a broad platform strategy that includes batteries alongside assets like gas, synchronous condensers, and behind-the-meter renewables. “When you invest in just one standalone battery project, you’re basically crossing your fingers,” he said.
Capital is available
Despite the market’s growing pains, the appetite for investment is strong. “The regulatory environment is improving, technology costs are coming down, and revenue structures are evolving,” said James Adams of Alexa Capital. “We’re still at the beginning, but capital is coming in.”
Still, investors are picky. Revenue strategies must balance optimization with bankability. Risk must be addressed clearly, and assumptions must be tested. “One of the biggest red flags,” said Pardy, “is a model that assumes everyone will act rationally.”
The fundamentals for battery storage in Europe are promising – growing renewables, increasing volatility, and urgent system needs. But business models are still evolving, grid access is scarce, and revenue streams are unpredictable. Those who adapt quickly and structure robust, financeable projects will shape the next phase of this still immature market.
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