More Markets Offer Revenue Floors to Battery Owners

Executive Summary

New capacity auctions are extending long-term payments to battery storage owners in more European markets, just as recurring summer weather patterns widen energy arbitrage revenues.

More countries are introducing capacity markets. Spain enacted its €9 billion capacity market in September, following approval of Germany’s auction earlier this month. Portugal has announced plans for one, and the Netherlands has filed its own, with the first Dutch auctions targeted for 2028. Italy already runs a capacity mechanism and assigns projects different capacity values by location.

Grid connection is getting more expensive. The UK is planning to introduce new commitment fees for battery storage projects in the queue. Germany’s grid fee reform would also charge a new capacity-based fee to batteries that miss the final investment decision deadline. Both raise the value of an existing industrial grid connection, since a battery sited at an existing site skips the multi-year interconnection queue.

Summer heat has become a regular supply-side risk. European power grids lack the flexibility to cover the loss of nuclear or hydro when heatwaves curtail baseload supply. In summer 2026, power prices in Poland ran from negative €120/MWh on days of excess solar output to €435/MWh for one evening peak. In France, power prices more than doubled from summer 2025, as cooling demand rose while low river flows cut hydro output and heat forced nuclear curtailments.

Germany

Grid fee reform will likely reward battery operators that move early and industrials that can shift demand.

Grid Fee Updates

Consultation on Germany’s grid fee reform closed on September 18, 2026. The Federal Network Agency (Bundesnetzagentur) is now expected to reach a final decision by late 2026.

Regulators confirmed the requirements for grid-connected batteries to qualify for a 20-year exemption from new capacity-based fees of €4-€7/kW-year. Projects must reach a final investment decision by January 1, 2027, and commission before August 4, 2029.

For industrial customers, a new variable grid fee would replace the current tariff, which heavily discounts steady around-the-clock consumption. The new fee would instead reward users that can shift demand with a battery.

Key Takeaways Behind-the-meter batteries let industrial users shift demand without changing production schedules, while limiting their exposure to proposed variable grid fees.

United Kingdom

Commitment fees raise battery development costs as regulators clear the data center queue.

Grid Fee Updates

Large-scale batteries waiting in the UK’s multi-year interconnection queues could pay up to £25,000/MW to hold their place. Ofgem, the UK energy regulator, expects to publish its final decision later in 2026.

Ofgem is also moving to filter speculative projects out of a data center connection queue holding roughly 50 GW. Consultation closed on September 16, 2026.

Faster approvals for shovel-ready projects would speed up data center demand growth and add to power price volatility.

Key Takeaways Higher commitment fees would slow large-scale battery additions in the UK and lift the lease rates that battery developers pay for industrial sites with existing grid infrastructure.

Spain

Capacity payments and data center rules could create two contracted revenue paths for batteries.

Capacity Market Updates

Batteries in Spain now qualify for revenue contracts of up to 15 years after the government enacted its €9 billion capacity market on September 15, 2026. The government must still set auction volumes, price caps and de-rating factors (the share of a battery’s capacity eligible for payments) ahead of the first round.

New Data Center Mandate

Consultation closed on September 10, 2026, on draft legislation that would require data centers to match 80% of their hourly electricity consumption with new renewable generation.

If the law passes as drafted, data centers would need to contract a large share of batteries now in development to meet the hourly target.

Key Takeaways Battery owners in Spain could soon earn some of the highest contracted revenue stacks in Europe from new long-term capacity payments and data center offtake agreements.

Italy

Locational de-rating lowers capacity values for batteries ahead of the November MACSE auction.

Capacity Market Updates

Italy’s transmission system operator, Terna, will hold its second centralized battery auction (MACSE) in November 2026, offering 15-year fixed-price payments for up to 16 GWh of large-scale battery capacity. Bids are expected to exceed the capacity on offer again. That competition could hold clearing prices down.

Terna’s next capacity auction, for 2028 delivery, is expected to follow the MACSE round.

Italy’s de-rating factors will range from 31% to 54%, depending on location, down from the previous 67% national average.

Key Takeaways Capacity payments offer battery owners in Italy a contracted revenue floor. Developers can use it to raise cheaper financing and offer better terms to the industrial sites that host them.

Power Price Volatility Updates

France’s day-ahead prices averaged €103.8/MWh from June through mid-September, more than double the €46.5/MWh recorded during the same period a year earlier. Heat drove up cooling demand while low river flows cut hydro output in France. EDF, France’s state-owned utility, reduced output at several nuclear units over the summer to stay within regulatory limits on discharge water temperature.

In August 2026, Romania’s Cernavodă nuclear plant shut down after record-low Danube River levels left too little water to cool the facility. With hydro output also low, day-ahead prices averaged €151/MWh in August, more than double the August 2025 average.

Poland’s day-ahead prices peaked at €435/MWh on August 4, 2026. On another summer day, excess midday solar output pushed prices as low as negative €120/MWh. The country’s coal-heavy system has little cheap, flexible capacity when solar output fades in the evening and demand peaks.

Key Takeaways Battery arbitrage revenues across Europe are rising on a recurring summer pattern in which heat cuts hydro and nuclear output as cooling demand climbs. Thermal- and solar-heavy systems still have little flexibility to cover lost baseload output during high demand.

Capacity Market Updates

In June 2026, Portugal announced plans for a new capacity mechanism. Battery owners could be among the main beneficiaries because the proposal sets a minimum storage duration of just under two hours. Auction volumes, dates, de-rating factors and delivery years have not been set.

The Netherlands filed plans with the European Commission for a new capacity market worth roughly €300-€600 million. The government is targeting the first auctions in 2028 for delivery in 2029. Batteries in the Netherlands could earn fixed long-term contracts on top of some of the highest energy arbitrage revenues in Europe.

Key Takeaways Portugal and the Netherlands are adding to the list of markets moving toward capacity payments, which would give batteries fixed long-term income.