For over two decades, the European energy markets have been undergoing a transition towards a greater integration of renewable energy sources (RES) within the overall energy mix. In Germany, this shift commenced around the year 2000 with the introduction of the Renewable Energy Sources Act (EEG). Since then, the share of RES in Germany’s final energy consumption has risen to approximately 55% by the end of 2024. Over this period, RES assets have established themselves as an appealing investment avenue for long-term institutional investors, offering stable and predictable cash returns. However, looking ahead, a continued increase in the share of RES within the energy mix presents several challenges — chief among them being the decline in capture prices. This has led to a recent reduction in returns for newly connected photovoltaic and wind projects. The root of this issue lies in the inherent inflexibility of grid systems, which often struggle to accommodate surpluses of inexpensive, clean energy during periods of peak production. Additionally, in the case of solar energy in particular, the production profile does not align well with demand patterns, resulting in greater price discounts compared to wind energy production profiles.
On the other hand, this situation presents an attractive opportunity for flexible assets such as battery energy storage systems (BESS), which are well-positioned to capitalise on the volatility within the energy markets. This white paper aims to highlight specific examples of the benefits that BESS assets can offer institutional investors, as we are firmly convinced that BESS technology will form a cornerstone of the next phase of the energy transition in the years to come.