The report “Grid Fee Calibration and Merchant BESS Viability in Germany” published by AFRY summarises that Germany’s battery energy storage system (BESS) market has expanded rapidly on the basis of merchant, unsubsidized investment and has become a key enabler of renewable integration and system flexibility. As storage requirements rise materially in the 2030s, preserving investable market conditions for merchant BESS is of systemic importance. In this context, the ongoing reform of storage grid fees under the AgNes process, including the potential introduction of static grid fee components, dynamic grid fees, and the use of flexible connection agreements (FCA), will be decisive for whether current investment momentum can be sustained beyond 2029. This study evaluates the economic sensitivity of merchant BESS viability to these instruments, identifying the mechanisms that most strongly affect project economics and the conditions under which storage remains investable.
Key findings:
Merchant BESS remain viable in 2029 under current rules, achieving IRs of around 12% against a 10% investment hurdle. The reference case operates with only -2% points of headroom above the investment hurdle.
Static grid fees are the decisive economic breakpoint. A capacity-based charge of 6 €/kW/a and a working charge of 66.5€/MWh on losses is already sufficient to reduce IRRs below a 10% hurdle. Static charges push IRRs below investment thresholds, with capacity-based grid fees emerging as the dominant structural driver, as they apply to the ordered connection capacity and reduce margins regardless of how the asset is operated.
FCA constraints are material but secondary. Moderately calibrated FCA reduce returns but do not, on their own, eliminate merchant viability.
Static grid fees and FCA compound. When combined, their effects remove the remaining economic headroom, leaving no viable unsubsidised investment configurations in the tested cases.
Dynamic instruments outperform static charges in steering behavior. Behavior-linked grid fees can incentivize grid-supportive operation without structurally undermining investment incentives.
Access the report here