‘Critical’ for Germany’s Capacity Market Design to Enable Battery Storage Participation

Why It Matters

A well‑designed capacity market will enable BESS to secure revenue streams, supporting grid reliability and the EU’s climate targets while attracting private investment.

Key Takeaways

• German capacity market design currently not technology‑neutral for batteries
• Poland’s market awarded only 685 MW of batteries after 2024 peak
• De‑rating factors can erode BESS revenue in capacity auctions
• Proper design could unlock financing and grid‑stability benefits for storage
• Industry calls for digital‑focused, future‑proof market rules

Pulse Analysis

The German government is preparing a new capacity market to replace dwindling coal and nuclear output, but experts warn that the rules must accommodate battery energy storage systems (BESS) or risk sidelining the technology. At the Energy Storage Summit in Stuttgart, Fluence senior policy associate Elisabeth Giesemann emphasized that a technology‑neutral design is essential for BESS to capture capacity payments. Similarly, SolarPower Europe’s Sonja Risteska highlighted how de‑rating mechanisms in existing schemes can undermine the business case for batteries, making careful rule‑making a prerequisite for a modern, digital grid. Such alignment also supports Germany’s ambition to meet its 2030 climate goals.

Poland’s recent capacity‑market experience offers a cautionary tale. 5 GW of battery contracts, the December 2025 auction slashed allocations to just 685 MW, largely because a high de‑rating factor made BESS less profitable. Nina Schmüser of Grenergy noted that policymakers reversed course as they sought longer‑term capacity, inadvertently discouraging further storage deployment. The Polish case illustrates how poorly calibrated rules can quickly erode investor confidence and limit the role of batteries in replacing retiring fossil‑fuel plants. The outcome underscores the need for transparent rule‑making.

Designing a German capacity market that rewards flexibility could unlock billions in BESS investment, bolster grid resilience, and accelerate the EU’s decarbonisation targets. By eliminating punitive de‑rating and allowing batteries to compete on equal footing with traditional generators, the market would provide a stable revenue stream for storage operators and attract private capital. Industry consensus now points to a forward‑looking framework that reflects digital‑era realities, ensuring that capacity mechanisms become a catalyst rather than a barrier for the next generation of clean‑energy assets. Ultimately, a well‑crafted market can drive systemic cost reductions.