In the heart of Europe’s energy transition, battery energy storage systems (BESS) are becoming more and more critical to deploy to help reshape our power landscape. And future prospects for the technology are looking bright. In fact, BESS became the most invested-in energy technology in 2023, so it’s not just talk, it’s also a lot of walk.
And as renewable energy sources get to dominate more of the grids around Europe, the need for more flexible, efficient BESS has never been more pressing. This article delves into the current state of the European battery storage market, examining the countries leading deployment, the impact of EU policies, and the outlook for future growth.
Table of contents
- The current state of the battery storage market in Europe
- Market drivers and challenges
- Leading countries in BESS deployment
- United Kingdom: A frontrunner in ancillary services
- Italy: Big targets, big growth
- Germany: Going beyond behind-the-meter storage
- Ireland: Balancing wind power with BESS
- The impact of EU policies on BESS deployment
- The EU battery regulation
- The renewable energy directive
- The clean energy package
The current state of the battery storage market in Europe
Europe’s battery storage market has witnessed encouraging growth in recent years. Solar Power Europe shows that the total amount of newly installed BESS capacity in the EU reached 17,2 GWh in 2023, marking a 94% increase YoY. This growth reflects the increasing recognition of BESS as an important tool for grid stability and renewable energy integration across Europe. In the Solar Power Europe high scenario, the 2024 deployment outlook shows that Europe will reach 29,6 GWh of installed capacity, marking a 72% increase YoY.
Market drivers and challenges
Several factors are propelling the adoption of battery storage across Europe:
- Renewable energy integration: As wind and solar power generation grows, so does the need for flexible storage solutions to manage intermittency.
- Grid stability requirements: BESS provides crucial services for frequency regulation and voltage support, enhancing overall grid resilience.
- Declining battery costs: Technological advancements and economies of scale have significantly reduced the cost of battery storage, improving its economic viability. Prices have decreased for years, and 2023 was yet another year with an all-time low of 139 USD/kWh, with forecasts pointing to prices of lithium-ion battery packs to reach prices as low as 80 USD/kWh in 2030, deployment is likely to be fueled even more.
- Supportive EU policies: The European Green Deal and various national incentives have created a more favorable environment for BESS deployment.
However, despite encouraging things happening in the European Parliament to support BESS and renewable technologies, adoption and implementation still needs to happen on the Member State level, which has been lacking in many countries.
But there is good news!
The new EU Regulation 2024/1747, complementing Regulation 2019/943, introduces a redesigned Electricity Market to enhance energy storage and flexibility across member states. The regulation aims to ensure better implementation of energy storage measures, addressing issues like double taxation and market access, to name a few.
Key points include:
- Flexibility assessments: Member states must conduct assessments to identify flexibility needs as per Article 19e.
- National targets: Member States must set and communicate energy storage and flexibility targets in their National Energy and Climate Plans, outlining measures to achieve these targets.
- Commission oversight: The European Commission will review national targets. If they are inadequate, the Commission can establish a Union strategy on flexibility, focusing on energy storage and demand response, potentially accompanied by legislative proposals.
Leading countries in BESS deployment
While growth is occurring across the EU, certain markets are setting the pace in battery storage deployment. Let’s take a look at them.
United Kingdom: A frontrunner in ancillary services
A frontrunner in the European BESS market, the UK has experienced some significant deployment of battery storage in the past years. This growth is largely driven by its ancillary services markets, particularly in frequency response services. Looking between now and 2031, the UK is forecasted to add 25, 68GWh of energy storage capacity, by far making it the largest deployer in Europe.
Italy: Big targets, big growth
A sleeping giant in the European BESS landscape. Italy’s market is characterized by a mix of utility-scale projects and behind-the-meter installations, but at the moment it is still mainly the residential that has the upper hand. However, this could soon change as the local TSO, Terna, has announced in a commissioned study that it needs some 71 GWh of utility-scale storage capacity to be developed by 2030 if Italy wants to live up to Eu targets.
Germany: Going beyond behind-the-meter storage
Especially after the energy crisis hit as a result of the Russian invasion, behind-the-meter BESS took off in Germany, but grid-scale projects are starting to ramp up and make Germany a key player in the European BESS market. Its installed capacity doubled in 2023, driven by some of the most supportive policies in the EU, and according to Wood Mackenzie, Germany is set to add the third most amount of grid-scale energy storage (8,81GWh) from now until 2031.
Expert Opinion: “Germany’s success in behind-the-meter storage is a testament to its long-standing commitment to the Energiewende,” says Dr. Andreas Müller, energy economist at the German Institute for Economic Research (DIW Berlin). “The combination of high electricity prices, falling battery costs, and supportive policies has created a perfect storm for BESS adoption.”
Ireland: Balancing wind power with BESS
The Integrated Single Electricity Market (I-SEM) of Ireland and Northern Ireland has shown good growth in battery storage and is considered a good market for BESS investments. This market’s success is partly due to its need for flexible capacity to balance its high penetration of wind power. According to Aurora research:” I-SEM presents a market of solid spreads, strong policy support, and capacity market remuneration, which provide investors with long-term contracted revenue”.
The impact of EU policies on BESS deployment
EU policies have played a crucial role in shaping the battery storage landscape across Europe. The European Green Deal, with its ambitious target of carbon neutrality by 2050, has been a major driver for BESS development.
The EU battery regulation
Proposed in 2020 and updated in 2023, the EU Battery Regulation aims to ensure sustainable and ethical battery production throughout the value chain.
Key aspects include:
- Mandatory carbon footprint declarations for batteries
- Minimum recycled content requirements
- Due diligence obligations for raw material sourcing. These policies will help to shape the BESS market significantly, promoting sustainable practices and fostering innovation in the sector, like China which recently connected the world’s first semi-solid BESS plant to its grid.
The renewable energy directive
The revised Renewable Energy Directive (RED II) sets binding targets for renewable energy consumption in the EU. While not directly addressing storage, this directive creates a more favorable environment for BESS by increasing the need for flexible capacity to integrate higher shares of renewable energy.
The clean energy package
The EU’s Clean Energy Package, particularly the Electricity Market Design Regulation, has improved market conditions for energy storage. It clarifies the role of storage in the electricity system and removes several barriers to its participation in energy markets.
Future outlook: projections and trends
Capacity projections
Industry analysts predict that the EU’s BESS capacity could reach 60 GW by 2030, a six-fold increase from 2023 levels. This implies a compound annual growth rate (CAGR) of approximately 25% over the next seven years.
Projected growth trajectory:
2024-2025: Expected annual additions of 5-6 GW
2026-2027: Acceleration to 7-8 GW per year
2028-2030: Potential for 10+ GW of annual additions
Emerging trends and technologies
Several trends are expected to shape the future of battery storage in Europe:
- Long-duration energy storage: As renewable penetration increases, there’s growing interest in storage technologies that can provide power for extended periods, from several hours to days or even weeks.
- Vehicle-to-grid (V2G) integration: The rising adoption of electric vehicles presents an opportunity for bidirectional charging, allowing EVs to act as distributed storage resources.
- Green hydrogen integration: Battery storage is increasingly seen as complementary to green hydrogen production, helping to optimize electrolyzer operations and manage grid interactions.
- Advanced battery chemistries: While lithium-ion batteries currently dominate, research into alternative chemistries like solid-state batteries and flow batteries could reshape the market in the coming years.
Expert Opinion: “The future of energy storage in Europe is not just about capacity, but about integration and innovation,” notes Dr. Elena Korosteleva, Senior Researcher at the European Battery Alliance. “We’re moving towards a more holistic view of energy systems, where storage plays a central role in balancing supply and demand across various timescales and sectors.”
Challenges and opportunities for renewable energy developers
For renewable energy developers, the rapid growth of the battery storage market presents both challenges and opportunities:
Challenges
Regulatory complexity: Navigating the diverse regulatory landscapes across EU member states can be challenging. The decision to enter a new market is often put off by the task of getting fully up to speed with the local regulatory landscape, not to mention what investors are willing to pay for projects in a given country.
Technical integration: Ensuring more and seamless integration of BESS with existing renewable energy assets and grid infrastructure requires careful planning and expertise, but also getting insurance companies onside projects to make sure that they are properly insured in case of malfunction and fires, which is an increasing problem as BESS deployment increases.
Market volatility: Revenue streams for battery storage can be subject to market fluctuations, particularly in ancillary services markets.
BESS noise: As BESS deployment edges closer and closer to residential areas, the topic of BESS noise must be a thing to consider.
Opportunities
Enhanced project economics: Pairing storage with renewable generation can improve project economics by enabling participation in multiple value streams.
Grid constraint mitigation: BESS can help developers overcome grid connection constraints in areas with high renewable penetration.
New business models: The evolving storage landscape opens up possibilities for innovative business models, such as virtual power plants and energy-as-a-service offerings.
A battery-powered future for Europe’s energy transition
As Europe continues its journey towards a carbon-neutral future, battery storage will play an increasingly pivotal role. From balancing grids and integrating renewables to empowering consumers and enabling new business models, BESS is at the heart of the continent’s energy revolution.
The rapid growth observed in markets like the UK, Germany, Italy, and Ireland provides valuable lessons for other European countries. As technology costs continue to fall and supportive policies take effect, we can expect to see accelerated deployment across the continent.
However, realizing the full potential of battery storage will require continued collaboration between policymakers, industry players, and researchers. Addressing challenges such as supply chain sustainability, regulatory harmonization, and long-duration storage will be crucial in the coming years.
For battery energy storage developers and investors, the message is clear: battery storage is no longer just an optional add-on, but a core component of future-proof energy systems. Those who can navigate the complexities of this rapidly evolving market stand to play a leading role in Europe’s clean energy future.
As we look towards 2030 and beyond, one thing is certain – the power of battery storage will be a driving force in Europe’s energy landscape, helping to unlock a more sustainable, resilient, and flexible energy system for generations to come.
