New market for instantaneous reserve launched in Germany, new opportunities for storage?

Since January 22, 2026 in Germany, instantaneous reserve has been procured through a market-based mechanism. This system service helps balance power imbalances in the electricity grid without delay, stabilizing grid frequency in the time window from a few milliseconds up to 30 seconds, before primary control power takes effect.

Until Jan. 22, this function was provided by gas- and coal-fired power plants, which could supply it inherently and at no cost due to their rotating masses. As coal plants are phased out and gas plants increasingly shut down at least temporarily, other market participants will need to assume this role.

Instead of inherent physical provision, the new model relies on market-based procurement, allowing inverter-based assets to participate. This opens the field to battery storage with sufficient grid-forming technology for the first time. The following overview explains how the instantaneous reserve market works and how attractive participation may be under current conditions.

Product and market design

Four products are defined for instantaneous reserve: a base and a premium product, each in positive and negative variants. The key difference lies in required availability. For the base product, systems must be able to provide instantaneous reserve for at least 30% of the settlement period. For the premium product, 90% availability is required. If availability exceeds these thresholds, remuneration increases incrementally.

Availability is calculated based on all 15-minute intervals within a settlement period, typically a calendar year, using unit-level measurement data. If the average active power of an inverter-based unit in a given interval exceeds the calculated threshold for negative instantaneous reserve, or falls below the threshold for positive instantaneous reserve, the unit is considered available for that interval.

For storage systems, availability is additionally determined using an energy-reservation formula defined in the model contract of the procuring transmission system operator. Remuneration is based on a fixed price, valid for a contract term of two to ten years.

Prices were set by the German transmission system operators in December. For the premium product, remuneration ranges from €805 to €888.50 per megawatt-second per year. For the base product, it ranges from €76 to €109.50 per megawatt-second per year, with higher values applying when availability requirements are exceeded.

Revenue potential can be illustrated using the formula for contractable instantaneous reserve. Assuming an overload capability of 100% of rated power in both directions, an activation time of 25 seconds, and a power rating of one megawatt, the contractable volume is 25 megawatt-seconds. At 90% availability under the premium product and a price of €805 per megawatt-second per year, this equates to annual revenue of around €20,125 per megawatt.

Energy and power reservation

Required energy reservation depends on the contracted volume of instantaneous reserve. Storage systems are only considered available if they remain synchronised with the grid for the entire 15-minute interval.

Energy storage systems must be able to charge or discharge sufficient energy to provide instantaneous reserve as designed. Due to the short duration, however, the required energy volume is small. With a maximum ramp-up time constant of 25 seconds and an inertia parameter m = 1, the required energy reservation for a 100-megawatt, 100-megawatt-hour storage system is only around 35 kilowatt-hours.

Power reservation is derived from the equation:

EMom = 0.5 × m × TA × PrE1

With m = 1 and TA = 25 seconds, this results in a required power reservation of 100% of rated power. Maximum and minimum dynamically available power also take into account possible overload capability, where specified in the certificate. At present, only a limited number of inverters offer this level of overload capability. If m is set to 0.3, the required power reservation falls to 30% of rated power. Systems capable of this already exist and, depending on system design, this may be achievable without conflicting with other revenue streams.

Procurement regions and demand

In the first fixed-price period, procurement regions correspond to the control areas of the transmission system operators, reflecting the fact that relevant instantaneous reserve demand exists across Germany. Over time, procurement regions are expected to be adjusted based on residual demand.

Demand projections through 2030 are taken from the System Stability Report 2025. Aggregated by control area, the figures are:

• Amprion: 53.8 gigawatt-seconds positive, 55.8 gigawatt-seconds negative
• 50Hertz: 100.4 gigawatt-seconds positive, 231.6 gigawatt-seconds negative
• TenneT: 140 gigawatt-seconds positive, 259.9 gigawatt-seconds negative
• TransnetBW: 19.8 gigawatt-seconds positive, 14.6 gigawatt-seconds negative

Once per year, beginning in the first quarter of 2027, transmission system operators will publish data on contracted instantaneous reserve, including demand coverage and procurement costs.

Remuneration and activation mechanism

Remuneration is based solely on availability, not on actual delivery. This distinguishes the market fundamentally from traditional balancing energy markets. All prequalified assets are pooled and contracted at administratively defined prices.

Actual provision cannot be selective, as it is driven by system frequency. Frequency deviations occur system-wide, meaning all grid-forming assets respond simultaneously and provide instantaneous reserve proportionally.

Eligible grid connections include extra-high, high, and medium voltage levels. With the consent of the relevant grid operator, participation at the low-voltage level is also possible.

Offers can be submitted continuously from the time of announcement by the transmission system operators, and no later than 22 January 2026, provided a valid framework agreement is in place. Instead of fixed-deadline tenders, fixed-price periods apply. Prices remain constant within each period and may be adjusted for new offers at the start of a new period. Once secured, however, a fixed price applies for the full contract term.

Economic assessment from a modelling perspective

Whether the market proves attractive for battery storage remains uncertain. Analysis by Aurora Energy Research suggests that providing instantaneous reserve can moderately improve project economics. In a model of a two-hour battery commissioned in 2029, the internal rate of return increases by up to 0.9 percentage points. Combined with cross-market optimisation, integrating base and premium instantaneous reserve can raise project net present value by around 14%. The economic sweet spot lies in the premium product, using a limited share of the battery and without constraining other revenue streams.

The larger risk lies in the regulatory framework rather than the product itself. Analysis linked to the AGNES process shows that grid fee structures have a stronger impact on profitability. Energy-based grid fees reduce internal rates of return by around 4.6 percentage points, while capacity-based grid fees, such as those discussed in the Netherlands, reduce them by around 13 percentage points and would largely erode the business case.

From pv magazine Germany.