EUROPE’s battery boom is proving that storage can help lower peak power prices.
But unless government policy changes, battery systems may simply profit from fossil-fuel use instead of helping to eliminate it. Battery energy storage systems (Bess) have proliferated in recent years, reshaping how profits are shared in the electricity market.
Global storage capacity grew 66% last year to almost 302 gigawatts, up 150-fold in a decade.
Falling production costs are changing batteries from expensive renewable add-ons into game changers that are revolutionising the structure of the power market.
Europe is a case in point.
The continent installed 36 gigawatt- hours (GWh) of battery storage last year, bringing its total above 100GWh, a 10-fold rise, according to SolarPower Europe, which expects additions to exceed 50GWh in 2026.
Much of that investment remains concentrated in a few markets, led by Germany, Bulgaria and Italy.
While natural gas benchmarks still largely determine European power prices, battery systems in those markets are quickly eroding that dominance.
That’s because batteries are – in power industry terms – cutting the head off “the duck”.
The so-called “duck curve” describes the typical pattern for European power prices. They usually fall to zero or below during sunny hours as surplus solar power floods the market, then rise with evening demand as fossil-fuel plants, mostly coal and gas-powered, replace photovoltaic (PV) output.
Increasingly, batteries are absorbing surplus electricity during peak PV production – so buying power when it’s cheap – and then discharging it during evening hours when it can fetch a much higher price.
This flattens the price curve, as battery systems profit handsomely from decapitating the “duck”.
And profit they do.
European carbon costs make electricity prices in those evening hours – when most of the power is still coming from fossil fuels – particularly expensive.
This situation has been amplified this year by soaring gas prices related to the Iran war-driven global energy squeeze.
For example, in Bulgaria, where batteries account for more than 20% of installed generation capacity, one of the world’s highest storage shares, Bess can now capture spreads exceeding €100 per megawatt-hour based on data analysis from the Bulgarian power exchange, Ibex.
Consumers have benefited as well.
Bulgarian power prices have already fallen by around 15% relative to neighbouring markets over the last six months.
Battery systems have made more electricity available during what are usually the most expensive evening hours, according to data from Bulgaria’s transmission system operator.
Bulgaria is not alone.
Other European countries are experiencing similar price dynamics, including Spain, Portugal, Italy, Britain and Germany, where batteries are absorbing surplus wind and solar electricity that would otherwise be curtailed by the grid operators.
Fossil fuel paradox
Bess is expected to facilitate the energy transition by reducing the volatility inherent in many renewables. But what the above spreads show is that, in many leading markets, battery systems are benefiting from the very fossil-fuel dependence they promise to eliminate.
Meanwhile, European Union (EU) governments are propping up this system by quietly subsidising coal and gas through complicated power capacity mechanisms intended to maintain grid stability.
These mechanisms keep fossil-fuel- powered plants running despite their uncompetitive pricing outside of evening hours or the coldest months.
The EU last month approved Germany’s 15-year, €35.2bil capacity mechanism to guarantee grid stability and long-term security of supply.
Moreover, Italy, where gas supplies roughly 38% of electricity, paid roughly €1.8bil through its long-standing capacity mechanism in 2025.
The country recorded some of Europe’s highest power prices last year.
From a political perspective, these government efforts are understandable.
Total grid decarbonisation may be the future goal, but European leaders may be loath to do anything today that could appear to threaten energy security, even if those risks may be overstated.
The blackout on the Iberian peninsula last year may not have been caused by renewables, but that didn’t stop many from blaming them.
What’s next?
What other options might European leaders have?
Scaling battery storage could potentially enable 24-hour green electricity.
However, this would likely require governments to remunerate Bess operators for the critical role they’re playing in maintaining dependable, affordable energy.
That’s because the spread of battery systems – and the elimination of the lucrative fossil-fuel window – would likely erode Bess margins substantially.
Technical improvements would also be needed.
Martin Vladimirov is the director of the Geoeconomics Program of the Center for the Study of Democracy. The views expressed here are the writer’s own.
