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Exploring Europe’s BESS boom 16 September 2026

"The European battery energy storage system market is booming, with investment in the development and financing of projects seeing a dramatic increase across the continent."

The European battery energy storage system (“BESS”) market is booming, with investment in the development and financing of projects seeing a dramatic increase across the continent. This article gives an overview of the key trends, challenges and opportunities that are shaping the current European BESS landscape, followed by a more detailed review of the state-of-play in France, Germany, Greece, Italy, Spain and the UK.

Whilst regulatory frameworks, revenue models and development challenges vary significantly between jurisdictions, a common theme is emerging across Europe: well-positioned BESS projects are attracting growing interest from lenders and investors, particularly where grid access and revenue certainty can be secured.

Challenges
  • The biggest – near universal – issue for European BESS is grid connection. Most European jurisdictions have vast gaps between the number of projects looking for grid connection and availability. As such, projects with a strong grid connection are much more attractive to lenders and investors. Jurisdictions are tackling the issue to varying degrees of success. Although a step in the right direction, Greece’s BESS Acceleration Scheme is oversubscribed, and Germany and Italy’s ‘first-come, first-served’ approaches need review to alleviate bottlenecks. Both France and UK are focussing on prioritising more mature/advanced projects, whilst Spain is placing its bet on regulatory reform.
  • Regulatory frameworks vary considerably between jurisdictions, creating uncertainty for developers, investors and lenders. The near constant evolution of rules and requirements exacerbates the problem. Developers will need to study and adapt to France’s new environmental rules introduced by the end of 2026, and although regulatory updates have sped up BESS development in Spain, results still vary by region, adding to the lack of clarity. This is a bigger challenge in less mature markets, whereas the more mature the regulatory regime, the more investable the jurisdiction. Having regulatory certainty is a key growth point for BESS across Europe.
  • Many BESS projects still depend heavily on merchant revenue. This is arguably both a challenge and an opportunity. Whilst merchant revenue can generate high returns for investors, it can be volatile and difficult to finance. This is particularly noticeable in less mature markets such as France and Greece, where there is a much heavier reliance on support mechanisms, reflecting the difficulty of financing projects based solely on merchant revenue.
  • We see both single point of responsibility (e.g. EPC) contractual structures and multi-contracted structures across the European BESS market. Probably the most common structure is for a Chinese battery that is then integrated into the relevant site by a balance of plant contractor. The BESS warranties provided by the battery supplier that offer protection for BESS performance and asset life are fundamental parts of any BESS transaction structure.
Opportunities
  • Lender appetite is growing fast across Europe as familiarity with the revenue mix and key risks for BESS projects grows. Projects backed by long-term revenue support mechanisms like Italy’s MACSE offer bankable lending opportunities. Similarly, co-location and hybridisation create opportunities for refinancing and portfolio expansion. This is particularly noticeable in Spain, where regulatory reform is accelerating co-located projects.
  • The demand for investment in both ready-to-build and operating BESS assets is also very strong. This is particularly true in more developed BESS markets like the UK and Germany, although premiums there are also high. Investors are therefore looking to growing markets (France, Greece, Italy and Spain) for opportunities.
  • The BESS sector is maturing across Europe. Whilst we continue to see merchant optimisation and floor contracts on many BESS projects, more and more are beginning to also apply tolling agreement structures. These fixed price contracted revenue streams are very attractive to lenders and investors as part of the revenue mix. We are seeing both physical (where the toller takes over the BESS asset for a fixed price) and financial (where the toller takes a financial position vs the BESS market) tolls becoming more widespread across Europe. BESS offtake contracting is an interesting and maturing part of the BESS sector.

France – unlocking value through hybridisation

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"Since mid-2025, the French BESS market has seen increased financings, with acquisitions and joint ventures also supporting growth."

Since mid-2025, the French BESS market has seen increased financings, with acquisitions and joint ventures also supporting growth. Importantly, interest in integrating BESS with existing renewable projects (hybrid projects) is on the rise.

Permitting: generally, a standalone BESS project must obtain a building permit and file an environmental declaration. These are usually hassle-free with a low risk of challenge or withdrawal. For hybrid or co-located renewable and storage projects (PV, onshore wind etc.), the main consideration is how the BESS might affect the existing project, particularly if it is subject to an Environmental Impact Assessment. If the BESS facility substantively modifies the existing project, greater diligence may be required to determine constraints and the applicable permitting process.

Environmental regulation: BESS facilities are subject to specific environmental regulations and related requirements. New rules for developing BESS projects are expected to be introduced by the end of 2026 including revised standards for:

  • the location and layout of a project;
  • accessibility;
  • design requirements for battery facilities; and
  • fire risk management.

Grid connection: existing DSO and TSO grid connection documentation has been adapted to developing BESS facilities, particularly technical grid connection schemes for data metering. To date, a significant number of early-stage BESS projects have filed a grid connection application to the TSO (RTE), resulting in oversubscription (approx. 7 GW requested of circa 1 GW available). Consequently, the TSO is reviewing grid connection applications and giving greater priority to more advanced projects, making securing grid connection rights a key issue. In parallel, there is significant development in the use of shared grid connection solutions (HV substations used by multiple assets to connect to the transmission system). This may decrease the costs and timings of grid connection works.

Project contracts: French BESS projects typically include an EPC contract and O&M agreement. Battery warranties are not generally assigned at the end of the two-year DLP, thereby requiring an O&M agreement be in place with the EPC contractor to extend the warranties for the duration (generally 13 to 15 years). As regards aggregation contracts, there is currently no standard approach in the French market, with commercial discussions taking place on a case-by-case basis, particularly when taking into account the lenders’ demands/coverage. The new rules coming into place in November 2026 should decrease the BESS’ remuneration in the French capacity market.

Germany – a BESS powerhouse

"One of Europe’s leading BESS markets, battery storage is expected to play an important role in the evolution of Germany’s electricity system. As the market expands, the successful development and financing of BESS projects will depend on how regulatory developments, grid access and commercial structures evolve."

One of Europe’s leading BESS markets, battery storage is expected to play an important role in the evolution of Germany’s electricity system. As the market expands, the successful development and financing of BESS projects will depend on how regulatory developments, grid access and commercial structures evolve.

Grid connection and operational limitations: grid connection remains the primary issue for BESS deployment in Germany, with requests vastly exceeding available capacity. The legacy ‘first-come, first-served’ process has led to speculative applications, creating long queues and waiting times. Consequently, projects face significant delays and uncertainty. Even after securing a connection, BESS projects can face operational constraints imposed by operators, such as curtailment risks, limited dispatch windows and reduced capacity availability. To counter these connection bottlenecks, Germany’s transmission system operators introduced a maturity assessment procedure (Reifegradverfahren), replacing the first-come, first-served approach with a cyclical, points-based prioritisation of applications by site security, technical readiness, applicant capability and grid/system value. This applies to large-scale storage projects connected to the transmission grid since 1 April 2026, following an amendment to the Power Plant Grid Connection Ordinance (KraftNAV) at the end of 2025 that removed battery storage systems from its scope. In addition, first distribution system operators have also changed or are in the process of changing their grid connection processes moving away from ‘first-come, first-served’ towards project readiness instead.

Regulatory uncertainty: the regulatory environment for BESS in Germany is constantly changing, especially regarding grid access rules, tariffs and permitting requirements. Ongoing reforms, including new allocation mechanisms and grid fee structures, are creating significant uncertainty for both developers and investors. This complicates planning, increases compliance risk and can delay investment decisions. Flexible connection agreements and congestion management measures can further restrict system utilisation and performance. These limitations can materially impact revenue generation and must be carefully considered in project design and financial modelling.

Route-to-market approach and long-term revenues: German BESS projects rely on stacking multiple short-term revenue streams, such as ancillary services and wholesale market arbitrage, rather than stable long-term contracts. This merchant exposure requires sophisticated trading and optimisation strategies to remain profitable. The absence of predictable, long-term revenue frameworks makes it challenging to secure bankable offtake structures.

Bankability: a combination of market volatility, regulatory uncertainty and evolving revenue streams creates significant challenges for project bankability. Investors face uncertainty around long-term returns, particularly as key revenue sources may decline due to market saturation. As a result, financing often requires more complex structures or higher return expectations to compensate for elevated risk.

M&A trends: Germany’s BESS M&A market remains highly active, with WFW having advised on several of the market’s most significant transactions to date. Consolidation continues among project developers, with strategic and financial investors targeting both ready-to-build portfolios and operating assets, whilst foreign investors continue to show strong interest in the German market. Buyers are placing increasing weight on grid-readiness and permitting status when pricing deals, reflecting the capital intensity of the new maturity assessment procedure, which requires developers to fund application fees, security deposits and extensive supporting evidence before a grid connection offer is even secured. This is driving a shift towards transaction structures in which better-capitalised buyers partner with or acquire developers earlier in the project lifecycle, sharing execution risk between technical development and downstream financing, construction and commercialisation. We expect this trend to continue as the maturity assessment procedure and wider network package reforms progressively separate advanced, well-capitalised projects from earlier-stage or speculative pipeline.

Greece – a market in transition

"Greece’s BESS market is undergoing a clear transition from subsidy-supported or CfD model to a merchant one. The introduction of the new schemes outlined below is a step in the right direction but delays and oversubscription have created new challenges."

Greece’s BESS market is undergoing a clear transition from subsidy-supported or CfD model to a merchant one. The introduction of the new schemes outlined below is a step in the right direction but delays and oversubscription have created new challenges.

Evolving framework meets strict permitting conditions: Greece has implemented three tenders offering operating and investment aid to standalone BESS projects (the “BESS Auctions”), as well as a merchant BESS regime to award priority grid connection rights to merchant BESS projects (the “BESS Acceleration Scheme”). Frequent policy shifts, however, generate uncertainty for developers and investors (coupled with high bank guarantee requirements to support applications). In addition, projects granted priority under the BESS Acceleration Scheme must meet tight deadlines, technical criteria, high financial guarantees and permitting requirements or risk losing grid priority. Licensing processes remain slow, which may limit how much of the pipeline will materialise.

Delays: the BESS Acceleration Scheme’s results have been delayed and are now expected by the end of  2026. The implementation of merchant BESS will provide much needed relief from rising pressure resulting from curtailments on wind and solar projects, with any delays causing additional strain to the electricity system and operating projects.

Shift to merchant risk: new projects are increasingly operating without subsidies or CfDs, instead relying on market revenues (arbitrage, balancing/ancillary services) which are neither fully mature nor long-term guaranteed, making cash flow forecasting difficult. This creates high revenue volatility which lenders struggle to underwrite. Some aggregators have started offering tolling agreements, but regulatory restrictions imposing a maximum BESS capacity ownership under the BESS Acceleration Scheme are slowing down a more widespread adoption of such agreements by the larger aggregators.

Financing constraints: Banks often require strong offtake structures – rare in merchant BESS – and clearer grid connection certainty. More equity-heavy structures are therefore needed to finance merchant BESS projects.

Oversubscription for priority grid capacity: over 9 GW of applications for merchant BESS grid connections were submitted under the BESS Acceleration Scheme, far exceeding the 4.7 GW capacity on offer. BESS projects which are not selected in the BESS Auctions or the BESS Acceleration Scheme will have little or no insight as to when they might obtain grid connection, so we expect many of these to be abandoned.

Italy – MACSE maxing

"Italy is improving its battery storage projects bankability through regulatory developments and new revenue support mechanisms – such as MACSE – to whet investor appetite. But grid connection restraints still need to be overcome."

Italy is improving its battery storage projects bankability through regulatory developments and new revenue support mechanisms – such as MACSE – to whet investor appetite. But grid connection restraints still need to be overcome.

MACSE: Italy’s new MASCE capacity mechanism will enhance bankability and make BESS revenues more stable by providing capacity-like payments. MACSE requirements (e.g. delivery of pre/post‑auction guarantees) should foster innovative bridge financing structures, facilitate early-stage capital deployment and support the growth of BESS investment platforms.

Flexible routes to market: whilst Italy offers a relatively deep ancillary services market, BESS revenues remain volatile due to multiple stacking models. The introduction of MACSE and investor access to various alternative strategies (merchant, optimisation, tolling, etc.) allows for a tailored risk-return profile depending on investment appetite.

Bankability: as a less mature market than some European countries, the absence of fully standardised tolling structures allows for flexible and bespoke arrangements, supporting innovative deal structuring and strong due diligence. However, this also results in increased transaction complexity and a reliance on counterparty creditworthiness to ensure stable cash flows.

Lender protections and structural complexity: compared to solar PV, BESS requires additional guarantees including bid bonds and performance security, tighter cash flow controls such as cash sweeps and hedging and a strong regulatory framework to support bankability.

Grid connection: grid connection remains one of the main constraints on BESS deployment in Italy, with connection requests significantly exceeding available grid capacity. Like Germany, the current ‘first-come, first-served’ framework has encouraged speculative applications, resulting in lengthy queues and waiting times. This regulatory framework is currently under review and a shift towards a selection process aimed at prioritising more mature and concrete projects is by the end of 2026. This should help alleviate queue congestion and unlock grid capacity.

Spain – growing strong

"Spain’s BESS market looks set to flourish following the European Commission’s approval of the country’s €9bn capacity market."

Spain’s BESS market looks set to flourish following the European Commission’s approval of the country’s €9bn capacity market.

Hybridisation: under Spain’s regulatory framework, a BESS asset added to an existing renewable project must be owned by the same project company as the renewable asset. This means adding BESS significantly modifies the original credit proposition and departs from a core project finance principle of ring-fencing, whereby the financed asset and its cash flows are protected from external business risks. This introduces new operational, construction and commercial risks to the existing financing structure, requiring lenders to reassess the project’s overall risk profile. Lenders are showing increased flexibility in approving co-location and hybridisation structures as operational experience, regulatory certainty and market acceptance of storage technologies continue to improve. Lenders are increasingly committing capital directly to BESS retrofits. Whilst this has so far been largely for hybridised storage projects, the Spanish market is also beginning to see the first project-financed standalone BESS transactions.

Growing lender appetite: BESS offers sponsors an additional revenue-generating asset which can enhance cash flow generation and support debt service, particularly relevant for projects with significant merchant tails. Early storage retrofits were generally permitted only during the development phase and on a fully sponsor-funded basis and supported by extensive lender protections, including sponsor indemnities. The rationale was that, prior to construction, the potential for a storage project to create liabilities capable of adversely affecting an existing generation asset were limited. Market practice now favours incremental debt solutions, often structured as uncommitted facilities. These enable sponsors to develop BESS projects and establish a preliminary financing framework whilst preserving lenders’ control over the process, frequently through enhanced consent and pre-emption rights relating to the eventual construction financing.

Capacity market: the European Commission’s approval of Spain’s capacity market represents a major milestone for the Spanish power sector. Approval is expected to pave the way for the launch of the first capacity auction at the end of 2026, creating a new and predictable revenue stream for flexible technology and accelerating BESS investment.

Regulatory developments: regulations have been approved to facilitate and speed up the development of BESS projects, especially through co-location. Results vary by region and there is still a learning curve but having certain projects exempt from environmental regulations is significantly improving development time. The new regulation removes the need for a separate environmental assessment for hybrid BESS projects located within the perimeter of a hybrid facility that has already obtained a favourable Environmental Impact Assessment, potentially shortening development timelines by up to twelve months.

Grid capacity: one of the main problems for BESS in Spain is the lack of capacity. This is being tackled through various initiatives including the 1 GW capacity released through the new regulations and the recent approval of flexible demand access permits. Now all the demand access for BESS is flexible, increasing the possibility to obtain demand grid access. A key objective of this regulation is to ensure that BESS projects do not compete with firm-demand users for grid capacity. As a result, BESS projects that have secured firm-demand capacity are incentivised to switch to a flexible-capacity model, while those that remain under the firm-capacity regime would face additional financial burdens.

UK – a long-term focus 

"The UK is Europe’s largest BESS market with around 10 GW operational installed capacity."

The UK is Europe’s largest BESS market with around 10 GW operational installed capacity.

Grid: a key concern for UK BESS assets is grid connection. There are substantially more projects in the UK than grid connections. The UK National Energy System Operator has introduced a reformed grid connection process that awards ‘Gate 1’ and ‘Gate 2’ offers subject to certain project readiness criteria. BESS projects without a Gate 2 grid connection (i.e. without a confirmed connection pathway and date) will have difficult discussions with lenders and investors. That said, provided a project has a clear route to grid connection, it will be well placed and attractive to market.

Lender appetite: Lenders are becoming increasingly comfortable with the risk profile and commercial nuances of financing BESS assets. The overcycling of BESS assets is a core discussion point as lender and developer/offtaker interests are not always aligned. Lenders always want to restrict cycling of a BESS asset to a number clearly below the ‘warranted’ cycling level in the BESS warranty provided by the supplier. Meanwhile, developer/offtakers may want to cycle close to or above this limit to obtain high short-term profit. Controls around this point (e.g. cash sweeps), plus key issues such as grid connection and revenues arrangements, will often be a key feature in the financing negotiation process. There are also numerous ‘portfolio financings’ for many BESS assets, which can include onboarding mechanics to facilitate the entry of future BESS projects in the perimeter.

Investor appetite: there remains strong appetite for UK BESS assets at both the ready-to-build and commercial operation phases. Key features affecting the valuation/investability of assets include:

  • grid connection;
  • level of construction risk;
  • revenue mix (and split of contracted revenue to merchant);
  • strength of long-term BESS warranties; and
  • track record of relevant developer in the BESS space.

Revenue contracts: optimisation agreements and floor agreements have been a feature of the UK BESS sector for several years. They remain popular revenue instruments for UK BESS projects as part of their revenue mix. Over the past year, we have seen a rise in tolling agreements. These take two forms: physical tolling agreements (where the physical toller essentially rents the BESS asset from the developer for a fixed price); and financial tolling agreements (a financial product where a financial toller takes BESS market risk, and the developer is provided a hedge against unfavourable BESS market conditions). Typically, a large BESS asset will use several revenue contracts of varying sorts as described above as part of its revenue mix.

Project contracts: UK BESS projects can use full wrap EPC or split construction contracting. It is most typical for a UK BESS project to have at least a battery supplier (often Chinese) and a balance of plant contractor (who is responsible for all the other works on site). Some of the key considerations in relation to this contractual mix include:

  • the interface mechanics to ensure all construction contractors are aligned;
  • the strength (and liability protections) for the BESS warranty package, including availability, performance, roundtrip efficiency, state of health; and
  • the alignment of the BESS warranties in the operational contracts with the offtake contracts.

LDES: on 26 June 2026, UK energy regulator Ofgem announced its list of ‘minded-to decisions’ for long duration storage projects (namely 8 hours and above) that will receive the support of the LDES cap and floor scheme to mitigate risk for, and promote delivery of, long duration storage assets. The ‘minded-to decisions” include 16 projects, 11 of which are long duration lithium BESS projects. Outside of the LDES scheme, the number of longer duration BESS projects has increased – with these being four to five hours rather than the typical two. The LDES scheme will no doubt accelerate this trend, with longer duration BESS projects in the LDES auction ranging from eight to 18 hours. There is some concern from the short duration BESS market that these long duration BESS projects will benefit from a subsidy and begin to crowd out unsubsidised short duration BESS. Unsurprisingly investment and lender appetite for any project with an LDES award is high.

Conclusion – get connected!

As Europe’s power systems become increasingly dependent on renewable energy, both short and long duration BESS are increasingly seen as a natural complement to existing assets, making them an attractive proposition. Challenges remain – particularly around grid connection, regulatory uncertainty and bankability – but markets are addressing these hurdles through grid queue reforms, streamlined permitting processes and new revenue support mechanisms. Compared to similar major infrastructure projects, BESS assets are quick, inexpensive and straightforward to build and operate. The bottom line across Europe? Provided a BESS project has a grid connection, it is very attractive to lenders and investors.

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