European Power Markets and Battery Storage Update

Key Takeaways

• Interconnection queues stall utility-scale batteries just as grids need more flexibility. Large battery pipelines in the U.K. and Germany are in congested queues while data centers drive up power demand. Behind-the-meter batteries at industrial sites with existing grid access can add more flexibility to most European power markets.
• Grid costs are soaring across major European markets. The U.K.’s National Energy System Operator (NESO) plans to raise grid fee revenues by over 150% in five years. Germany cut its gas capacity target to 8 GW, down from 20 GW, due to supply chain bottlenecks, likely exposing the grid to rising price volatility.
• Italy’s first battery auction cleared at notably low prices. The inaugural large-scale government auction for 10 GWh of battery storage cleared at less than half the regulatory price cap, potentially squeezing returns enough to slow the country’s utility-scale buildout. Commercial and industrial batteries can offer a clearer path to profit by stacking tariffs, wholesale revenues and capacity payments.
• Spain’s post-blackout reforms and data center growth open new markets. Spain has allocated €520 million in battery grants and plans a capacity market after April’s 2025 blackout. Ireland opened its wholesale market to batteries for the first time in November 2025, with capacity auctions clearing at €411/MW-day.