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Sep 26, 2025
4
min
Europe’s power game is changing fast.
As batteries move to the heart of Europe’s energy transformation - from grid stability to renewing how we use and profit from power - new markets emerge, old ones saturate, and the strategies for securing returns become both more creative and more complex.
Why is energy storage seeing momentum?
As renewables grow, power systems become more unpredictable. Wind and solar don’t always play by the clock. Fluctuations in their output mean energy storage systems, especially advanced batteries, aren’t just helpful - they’re essential for keeping grids balanced and give value where volatility reigns. But tapping into that potential isn’t a straightforward affair.
Current snapshot of operational battery storage capacity across Europe highlights stark differences between mature and emerging markets.
Top 10 countries in terms of BESS operational capacity. Source: PV Tech / Clean Horizon
Let’s break down the new energy economy, focusing on three key areas:
I. Revenue Streams: How do storage projects earn?
A. Wholesale Markets
Think energy arbitrage: buy low, sell high. Batteries charge when renewables make supply abundant (and prices dip), then discharge when demand (and price) peak.
Both day-ahead and intraday electricity markets are the action zones. Intraday in particular rewards those nimble enough to trade closer to real demand—with higher risks but often higher rewards.
B. Ancillary Services
European electricity grids, tightly interconnected, rely on balance. This is where batteries come in - offering services that keep frequency steady (like Frequency Containment and Restoration Reserves, FCR and aFRR).
These services are usually auctioned and paid just for availability. At market launch, prices can spike due to limited flexible supply - early movers stand to gain most before competition increases.
C. Subsidies and Capacity Mechanisms
Some countries, especially those just opening up to storage or scaling up renewables, backstop investment with direct funding or capacity payments, as seen in Poland and Spain.
These subsidies can cover a chunky portion of up-front costs, making new markets much more attractive for early participants.
Poland’s capacity mechanism auctions have accelerated battery storage pipeline growth, awarding >2.5 GW of contracts by 2029.
Capacity mechanism in Poland clearing prices and volumes. Source: PV Tech / Clean Horizon
II. The Shifting Map: Which Markets Offer What?
Countries are progressing through different stages:
Emerging Hotspots: Poland and Spain are rolling out big batteries, often helped by public support. Ancillary service markets are just opening, so price spikes for flexibility are common while competition is still thin.
Intermediate Zones: Sweden, where one-hour batteries earned impressive returns via frequency services. But with more batteries entering, prices are already slipping.
Mature Markets: France and Germany set the stage on storage early. Now, certain markets (like FCR) are saturated, competition is rising, and returns per battery have slid, shifting the appeal to longer-duration batteries and more complex cross-market strategies.
III. Making the Most of Multiple Revenue Streams
Optimising storage returns is now an art of “portfolio play” rather than a single-market game. As unit returns in any single market shrink:
Successful operators diversify: Using intelligent, often algorithm-driven strategies to stack revenues - mixing energy trading, various ancillary services, and capacity mechanisms where available.
Longer-duration batteries become more valuable, enabling participation in multiple markets and longer reserve services, especially as the market matures and saturates. (One-hour batteries lose premium revenue opportunities.)
France Clean Horizon Storage Index extract. Source: PV Tech / Clean Horizon
Does early participation guarantee big wins? Not always, but being first to a newly launched market gives a clear advantage before “price cannibalisation” bites.
Three Practical Takeaways:
Timing Matters: Early market entries or fresh ancillary service launches offer higher rewards, but watch for fast saturation.
Market Diversity Builds Resilience: Don’t rely on a single revenue stream - stack services and hedge across markets.
Strategic Tools Make the Difference: Sophisticated simulation and optimisation tools (like those mentioned in Clean Horizon’s Storage Index) are key to realistic revenue assessment and daily trading.
Where Does This Leave the Modern Storage Investor or Operator?
Europe’s ongoing storage surge is a story of strategic agility. The best returns flow to those who can read markets, diversify services, adapt to regulatory shifts, and use data-driven insight to outmaneuver competition. Models that worked even two years ago are already past their prime.
Note: The analysis in this blog draws on insights from a detailed report published by **PV Tech (May 2025 edition)**, which explores the evolving revenue streams for battery energy storage across Europe’s key markets.
About Penomo
Penomo is a digital asset infrastructure platform specializing in tokenized energy and AI infrastructure financing. By transforming physical infrastructure into compliant digital securities, we connect private capital markets with institutional-grade renewable energy and AI investments.* Through tokenization, Penomo is streamlining capital access, enhancing liquidity, and enabling efficient financing for the global energy transition and AI expansion.
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