AFRY Study Warns Grid Fee Changes Could Undermine Merchant Battery Storage Economics in Germany

AFRY Study Warns Grid Fee Changes Could Undermine Merchant Battery Storage Economics in Germany

(IN BRIEF) AFRY Management Consulting has published an analysis warning that the planned expiration of grid fee exemptions in Germany in 2029 could threaten the economic viability of battery energy storage projects. The study finds that battery storage investments can remain financially attractive if exemptions continue, but even modest grid charges could reduce returns below acceptable levels. The analysis highlights that Germany’s grid fee reform under the AgNes framework will be critical for the future development of merchant battery storage and the country’s ability to integrate renewable energy. Regulatory uncertainty surrounding future tariffs and connection agreements is already affecting investor decisions and the pipeline of planned storage projects.

(PRESS RELEASE) SOLNA, 26-Feb-2026 — /EuropaWire/ — AFRY Management Consulting has published a new analysis indicating that continued grid fee exemptions will be essential to maintain the economic viability of battery energy storage systems (BESS) in Germany. The study examines the potential effects of upcoming changes to Germany’s grid fee framework under the Allgemeine Netzentgeltsystematik Strom (AgNes) and concludes that the scheduled expiration of existing exemptions in 2029 could significantly affect future investment in energy storage.

According to AFRY, Germany has emerged as one of Europe’s most active markets for merchant battery storage projects, with many installations developed without subsidies. A key factor supporting this growth has been the current regulatory structure, which exempts battery storage systems from grid fees. These conditions have supported the deployment of storage assets that provide flexibility for integrating renewable energy sources and maintaining grid stability.

The analysis evaluates the potential financial performance of a representative battery storage project expected to begin operations in 2029. Different grid fee scenarios were assessed and compared with current practices in markets such as the United Kingdom and Belgium. The findings suggest that battery storage projects can remain financially viable if grid fee exemptions continue, with projected internal rates of return of roughly 12 percent. However, the study indicates that this level of return offers only a narrow margin above typical investment thresholds, leaving projects highly sensitive to additional cost burdens.

AFRY Senior Principal Carlos Perez Linkenheil emphasized that the design of grid fee systems should focus on encouraging efficient operational behavior rather than imposing fixed structural charges that do not influence how storage assets operate. Even relatively small additional grid charges could significantly reduce the financial attractiveness of battery storage investments, he noted.

Impact of Future Grid Fee Structures

The study also assessed the impact of operational constraints, including Flexible Connection Agreements, on battery storage economics. AFRY found that moderate operational limitations would not necessarily undermine project viability. In contrast, the introduction of fixed grid fees could have a substantial impact on investment returns.

Under scenarios involving static grid charges, even modest fee levels could reduce internal rates of return below the levels typically required by investors. Higher grid fee levels would make merchant battery storage projects financially unviable.

AFRY’s analysis highlights that Germany’s ongoing grid fee reform represents a critical turning point for the development of merchant battery storage. The country’s electricity system is expected to require substantial storage capacity to support increasing shares of renewable energy generation. If private investment in storage becomes uneconomic due to regulatory changes, similar capacity may need to be developed through subsidized programs, shifting costs within the electricity system rather than reducing them.

Regulatory Uncertainty and Investment Risks

The report also points to regulatory uncertainty surrounding future grid tariffs and connection arrangements as a significant concern for investors and project developers. Because tariff structures under the AgNes reform are still being defined, developers face difficulty evaluating long-term project economics.

Although few battery storage projects planned for operation in 2029 have reached final investment decisions, AFRY notes that regulatory design choices made today are already influencing the future pipeline of projects and Germany’s attractiveness as a market for merchant energy storage investments.

The full report can be found here

Background information

Market complications arise from the current regulatory uncertainty regarding future fees and connection agreements. This unpredictability creates significant risk for developers and investors, potentially undermining Germany’s attractiveness for merchant BESS. While few assets slated for 2029 have reached a final investment decision, tariff design choices made today are already influencing the entire future project pipeline.

The full report can be found here

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Media Contact:

Carlos Perez Linkenheil
Senior Principal, AFRY Management Consulting
carlos.perezlinkenheil@afry.com
+49 15 22 296 80 40

Andrea Giesecke
Head of Group Communications, AFRY
andrea.giesecke@afry.com
+46 10 505 00 42

SOURCE: AFRY