Consultant, M.Sc. Industrial Engineering
Germany: Co-location of Battery Storage and RE Plants: The Path to Economically Viable Projects
- Battery storage can increase the profitability of existing and new RE plants
- Dynamic developments in the electricity market and the regulatory environment create new opportunities & risks
- Analysis tool simulates past and future revenues for well-founded co-location decisions
The German electricity market is undergoing a fundamental transformation: the expansion of renewable energies is leading to increasing volatility in power feed-in and negative exchange electricity prices. At the same time, grid bottlenecks are occurring more frequently, leading to curtailments of generation plants and rising redispatch costs.
Limited grid connection capacities pose an additional challenge for plant operators. For operators of renewable energy plants, this changes the revenue structures and increases the requirements for economically viable marketing. The integration of a battery storage system (“co-location”) can unlock additional flexibility and open up new revenue potential here.
Current Challenges of Electricity Generation from Renewable Energies
The German electricity market is in the midst of a profound structural change. The steadily increasing share of renewable energies is leading to increasingly volatile power generation. Today, around 60 % of electricity generation comes from renewable energies, and the trend is rising.1
This development is particularly evident on the spot market:
The number of hours with negative electricity prices on the German day-ahead market has risen sharply and reached a new high in 2025 with around 575 hours.2 At the same time, price volatility in the spot market remains high, with daily spreads of over 100 €/MWh.3 For operators of RE plants and storage systems, this means: revenues are becoming less and less predictable – classic flat-rate assumptions are no longer sufficient.
In parallel, commercially or market-based motivated curtailment of renewable generation plants is increasing significantly. In 2025, almost 1.75 TWh of wind and solar power were curtailed in Germany, primarily due to negative exchange prices and stricter subsidy conditions. In particular, the “Solar Peak Act” increased the pressure on operators to react flexibly to market signals, as EEG remuneration is increasingly eliminated during negative prices.4
In addition, the ongoing expansion of renewable energies is leading to strain on the power grids: limited and underutilized grid connection capacities and regional bottlenecks are the order of the day. To avoid grid overloads, grid expansion is being pushed forward, but transition measures (“grid congestion management”) are necessary in the short term.
In 2025, the volume of redispatch actions (reduction or curtailment of feed-in from generation plants by grid operators) amounted to 15.6 TWh. 60% of this was attributable to renewable energy plants (9.4 TWh).5
For curtailment of this type, plant operators receive financial compensation from the grid operator for the lost revenue from the curtailed energy volumes (lost work). We reported on the influence the BMWE’s “grid package” could have on the current regulation in this article on February 18, 2026: BMWE’s “grid package”: What the draft bill could mean for grid connection, Redispatch 2.0, and RE projects.
Battery Storage as a Key Technology
For this reason, flexibility options in the power system are becoming increasingly important. Battery storage systems (Battery Energy Storage Systems = BESS) are considered a key technology: they can balance volatile generation, provide system services, and thus contribute to grid stability. Battery storage systems make it possible to shift electricity in the grid through targeted charging and discharging and thus directly monetize systemic flexibility.
Variants of Co-location Projects
The combination of BESS is possible with various RE generation plants. Frequently, utility-scale PV plants are supplemented by BESS, but couplings with rooftop PV systems or wind turbines also fall under the term “co-location.”
If both the RE plant and the BESS are newly planned and built, this is referred to as greenfield projects. Brownfield projects involve retrofitting an existing RE plant with a storage system (so-called retrofit).
Furthermore, a distinction is made in co-location projects between green power or gray power storage. In the case of green power, the storage system is only charged with electricity from the RE plant (green power) and does not draw any grid power. In the current regulatory framework, this maintains the full EEG eligibility of the RE electricity.
In the case of gray power storage, the storage system also loads electricity from the general supply grid (gray power) in addition to the RE electricity. This results in new revenue potential from arbitrage trading. However, according to the current legal situation, the temporarily stored green power loses its eligibility for subsidies in the process.
As part of the Federal Network Agency’s MiSpeL process, however, a determination is currently being drafted that will enable a distinction between the stored green and gray power quantities. Thus, the EEG subsidy for temporarily stored green power will be maintained.
Hybrid Plant Constellations Lead to Win-Win Situation
While stand-alone battery storage systems exploit the arbitrage potential resulting from increasing price volatility in the day-ahead and intraday markets, the combination of pure RE generation projects with a storage system is becoming increasingly economically relevant. Germany is currently considered a leader in the field of co-location – based on market size and the great economic potential compared to individual RE projects6.
Through storage integration (co-location), feed-in peaks can be smoothed, curtailment in phases of negative prices reduced, and the profile value of the generated electricity increased.
Against the background of stricter regulatory frameworks – such as the elimination of remuneration during negative prices – as well as falling EEG subsidy rates in the recent auction rounds7 in the first segment (utility-scale PV) or onshore wind energy, the revenue conditions for operators of renewable generation plants are changing significantly. Storage systems can help optimize the marketing of the electricity generated and unlock additional revenue potential.
Redispatch risks can also be reduced through the temporary storage of RE electricity.
In addition, the shared use of existing infrastructure lowers costs and ensures that the grid connection (and thus the grids) can be better utilized. We reported on the advantages of flexible grid connection agreements (Flexible Connection Agreements) in this article on February 26, 2026: From Bottleneck to Efficiency: Legal and Economic Perspectives on Flexible Connection Agreements.
Storage systems thus convert volatile generation into more predictable cash flows and lower revenue risks for investors.
Regulatory Challenges
Apart from economic considerations, the regulatory environment of RE projects always plays a role. In particular, project planning currently requires looking even further into the future than usual.
Due to the tense situation in the energy industry and requirements under European law, several legal reforms are currently pending – AgNes (the realignment of the grid fee system including feed-in parties), the German government’s grid package, and new requirements for construction cost subsidies, including for green power storage, reveal new opportunities and risks and must therefore be clearly examined before a project is implemented.
Conclusion
Battery storage systems have developed into a decisive factor for economic viability and strategic positioning for both greenfield and brownfield projects. However, their revenue potential depends significantly on market mechanics, operating strategies, and regulatory frameworks. Current regulatory developments – for example, regarding grid fees, the grid package, or construction cost subsidies – create new opportunities and risks that must be categorized at an early stage.
As a trusted partner, we advise you on your co-location battery storage project! With our interdisciplinary team, we support you with regulatory issues, data-based market analyses, and business modeling.8
For this purpose, we have developed our algorithm-based analysis tool Energy Prophet. It forecasts revenues from arbitrage trading and for co-location projects with RE plants (green power storage)9.
The tool makes revenue potential transparent, quantifiable, and comparable. It maps real market conditions, uses price volatility, and systematically analyzes different revenue sources. This provides you with a sound basis for decision-making for investments, project development, and marketing strategies – in an electricity market where flexibility increasingly determines economic viability.
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Sources:
1 Pie charts on electricity generation | Energy-Charts
2 Grid Transparency > Renewable Energy and Levies > EEG > Transparency Requirements > Market Premium > Negative Spot Market Price – Summary Tables
3 Exchange electricity prices | Energy-Charts
4 Voluntary curtailment of renewable generation rises to record level of almost 1.75 terawatt hours in 2025 – pv magazine Germany
5 SMARD | Action volume stable for the year as a whole
6 Aurora Energy Research: Germany most attractive co-location market in Europe – pv magazine Germany
7 Federal Network Agency – Auctions
8 Investment advice battery storage | RÖDL
9 RÖDL Energy Prophet | RÖDL