AleaSoft Energy Forecasting, October 28, 2026. Battery storage is advancing in Europe, but investment and financing opportunities differ across markets. Spain, Italy and Germany are developing different capacity and support mechanisms, while hourly prices, ancillary services and regulatory conditions determine the profitability of BESS projects. These differences make it necessary to analyse each market using specific long-term forecasts.
Italy: long-term contracts to support storage
Italy is one of the European markets that has made the most progress in contracting energy storage capacity over the long term. The MACSE mechanism, managed by Terna, awards contracts through auctions that provide remuneration for the availability of storage capacity over 15 years.
In September 2025, Terna held the first MACSE auction, awarding 10 GWh of storage capacity scheduled to enter operation in 2028. The weighted average award price was €12 959/MWh per year, well below the ceiling price of €37 000/MWh per year. The capacity offered was more than four times auction demand, demonstrating investor interest and strong competition between projects.
The second auction is scheduled for November 24, 2026, with delivery in 2029 and a reference storage requirement of 16 GWh, which may be adjusted according to the additional capacity available. In September 2026, the Italian regulator ARERA set a ceiling price of €27 000/MWh per year for this auction, lower than for the first round.
MACSE provides a revenue structure that can facilitate financing for new facilities. In exchange for contractual remuneration, successful bidders must build the facilities and make the committed capacity available to the market in accordance with the rules of the mechanism. These revenues therefore cannot be combined without restrictions with merchant opportunities for the same capacity.
This model reduces exposure to certain uncertainties in electricity markets, although it does not eliminate the risks associated with investment costs, project delivery, contractual obligations and battery operation.
Germany: market revenues and new capacity signals
In Germany, battery projects have developed business models based primarily on price arbitrage and participation in balancing markets. These revenue sources offer opportunities, but also expose projects to changes in prices and competition from new storage facilities.
On September 2, 2026, the European Commission approved a German capacity mechanism with an estimated cost of between 15 600 and 35 200 million euros, intended to ensure security of supply from 2031.
The mechanism provides for contracts of up to 15 years and will allow generation, storage and demand response to participate, covering both existing facilities and new investments, in accordance with the conditions of each auction.
Two auctions are planned for 2026 for new capacity capable of ensuring supply over extended periods, each with a volume of 4.5 GW of de-rated capacity. The deadline for submitting bids in the first round was September 8. The Bundesnetzagentur expects to announce the awards before November 3. The second round will be announced on November 10. Subsequent auctions in 2027 and 2029 will be open to all technologies, including storage, and to existing and new capacity.
Germany also plans to develop a structural capacity mechanism to meet supply needs from 2032, with a design independent of the mechanism approved in September.
Grid access and use conditions also affect profitability. The Bundesnetzagentur is reviewing the electricity grid tariff system, with specific proposals for storage. The application of new charges will depend on the outcome of the regulatory process and the exemptions in force for eligible facilities.
For investors, this context makes it necessary to assess current revenues from arbitrage and balancing services alongside future market developments, regulatory conditions and the potential to obtain capacity remuneration.
Competition between batteries will be an important factor. As installed capacity increases, the participation of new facilities may change both hourly price spreads and balancing service revenues.
Spain: new revenue opportunities from firm capacity
Spain is at a different stage. Storage revenue opportunities rely on electricity market price arbitrage and ancillary services, while progress continues towards launching the new capacity market.
Order TED/966/2026, of September 15, established the capacity market for the Spanish mainland electricity system. The mechanism will allow generation, storage and demand facilities to participate through competitive auctions.
Remuneration will be linked to the firm capacity that each facility can provide to the system. For batteries, this capacity will depend on installed capacity and the de-rating factors set for each technology, which have yet to be defined. For hybrid facilities, firm capacity will be calculated by module, and the total cannot exceed the granted grid access capacity. The service provision period for new investments may reach a maximum of 15 years, although its specific duration will depend on the technology and the conditions of each round.
This mechanism introduces a potential source of more stable revenues for BESS projects. However, its actual contribution to financing will depend on the volume of capacity awarded, the prices resulting from the auctions, the de-rating factors and availability obligations.
While these parameters are being finalised, revenue forecasts for energy markets and ancillary services remain essential to investment decisions.
Hourly prices reveal different opportunities in each market
Regulatory differences combine with different price structures. Between January 1 and October 28, 2026, the average daily spread between the highest and lowest hourly prices was €158.13/MWh in the German market, €133.98/MWh in the Spanish market and €96.86/MWh in the Italian market.
During the same period in 2025, these spreads were €134.92/MWh in Germany, €103.40/MWh in Spain and €76.68/MWh in Italy. All three markets recorded a year-on-year increase in spreads. Spain saw the largest percentage growth, at 30%, followed by Italy, at 26%, and Germany, at 17%.
These results show that theoretical arbitrage opportunities vary between markets and evolve differently. Germany records the highest average spreads, while Spain shows the strongest year-on-year growth.
However, a wider hourly spread does not necessarily imply greater profitability for a battery. Actual revenues depend on its duration, efficiency, degradation, operating strategy and technical constraints. The ability to participate in different markets, grid connection conditions and the contracted revenues each project can secure also have an impact.
Historical spreads cannot be extrapolated directly over the long term either. The entry of new batteries changes hourly price profiles by increasing demand during charging hours and supply during discharging hours. This effect may gradually reduce some arbitrage opportunities.
The economic valuation of storage must therefore consider current differences between markets as well as their potential evolution as the penetration of renewable energies and storage increases.
Financing depends on the combination of revenues and risks
The differences between Spain, Italy and Germany show that the same battery, with identical power and storage capacity, can deliver very different economic results depending on the market in which it operates.
In Italy, a project awarded a MACSE contract can rely on long-term contractual remuneration. In Germany, a project with merchant exposure must demonstrate the robustness of its arbitrage and balancing service revenues, taking into account the opportunities and conditions of the new capacity mechanisms. In Spain, developers must assess market revenues and the potential for firm capacity remuneration, which remains dependent on the results of future auctions.
Contractual alternatives also exist, such as tolling agreements, which can reduce direct exposure to revenue volatility. However, each financing structure allocates risks differently among owners, operators and buyers of storage services.
For banks and investors, the existence of a capacity mechanism does not in itself guarantee a project’s bankability. Expected cash flows, contractual obligations, regulatory risks and the ability to service debt under less favourable scenarios must all be assessed.
Europe needs forecasts specific to each market
The growth of storage in Europe offers significant investment opportunities, but there is no single economic model that can be applied uniformly across different markets.
The evolution of hourly prices, renewable generation, electricity demand, interconnections, ancillary services and capacity mechanisms will determine the revenues batteries can earn in the coming years.
Assessing these projects requires long-term electricity market price forecasting with hourly granularity and scenarios consistent with the expected evolution of each system. These forecasts make it possible to simulate battery operation, estimate revenues and assess their sensitivity to different market scenarios.
The expansion of storage will depend on the flexibility needs of electricity systems and on projects’ ability to demonstrate profitability and secure financing. Understanding the characteristics of each European market will be decisive in identifying investment opportunities and building business models that remain sustainable over the long term.
Long-term forecasts and revenue analysis: the role of AleaGreen and AleaStorage
Valuing a storage project in Spain, Italy or Germany requires hourly price forecasts for the entire life of the asset, spread and volatility scenarios, and an estimate of the revenues each country’s capacity mechanisms can provide. AleaGreen, the division of AleaSoft Energy Forecasting specialising in long-term forecasts, provides price forecasts for European electricity markets with hourly granularity and confidence bands for asset valuation and the financing of renewable energy projects and storage projects.
For its part, AleaStorage, the division of AleaSoft Energy Forecasting specialising in energy storage, estimates revenues for stand-alone batteries and hybridisation projects with renewable energies in energy and ancillary service markets, assesses capacity market revenues and models long-term price and volatility scenarios.
Source: AleaSoft Energy Forecasting