As Germany races toward a net-zero power system, the pressure is building—not only to expand renewables, but also to ensure they remain profitable. Solar PV installations are surging, yet power market dynamics are shifting in ways that threaten returns. Fortunately, new modeling shows that strategic battery energy storage deployment could turn this challenge into a system-wide opportunity.
Germany installed over 16 GW of solar PV in 2024, pushing total capacity to new highs. But with that growth has come a troubling side effect: falling revenues. Wholesale market saturation, especially during midday peaks, is driving down prices for solar electricity, with PV power often fetching just €0.03 to €0.04/kWh.
This so-called “cannibalization effect” is raising concerns among project developers and policymakers alike. For solar systems selling power via direct marketing mechanisms, revenue stability is slipping. Increasingly frequent negative price events compound the risk, threatening project bankability.
To understand how to mitigate these pressures several scenarios for battery storage expansion by 2030 need to be considered. In a baseline case, Germany reaches 20 GW of installed battery capacity. But what happens if the country pushes further to 25 GW or 30 GW?
The analysis shows that even modest increases in battery capacity can yield outsized benefits. With 25% more storage, negative pricing events drop by around 3%. Doubling that increase cuts negative periods by 7%. At the same time, PV market values, essentially the revenue-per-megawatt-hour that solar projects can expect rise by 6% to 12%.
These improvements don’t stem from speculative price spikes. In fact, the base electricity price remains largely stable. The value is created through flexibility: batteries absorb excess solar generation during low-price hours and discharge it when the grid needs it most. This rebalancing smooths the price curve and elevates returns across the board.
Unlike traditional peaker plants or baseload generators, solar farms are especially exposed to midday price crashes. That’s where battery co-location becomes particularly powerful. By siting batteries directly alongside PV assets, developers can shift production out of the lowest-value hours, transforming marginal energy into a high-margin product.
Crucially, this isn’t just a win for private investors. The modeling shows that rising PV market values reduce the burden on public subsidy schemes. In Germany’s tender system, if market prices are higher, fewer top-up payments are needed from transmission system operators. With battery expansion, those support costs could fall by as much as 85% over a project’s lifetime.
One caveat for battery owners: a more stable power market may reduce volatility-driven revenues.
The future of energy storage lies not in exploiting extreme price events, but in providing dependable flexibility services. Developers who lean into this long-term value proposition will be best positioned for consistent success.
To fully realize these benefits, Germany must continue streamlining permitting, enabling co-located solar-plus-storage projects, and creating grid rules that reward flexibility. The more batteries are integrated at scale with higher C-rates and longer durations, the more they support the economics of solar and the stability of the grid.
With over 300 GW of battery projects already seeking grid connection, the momentum is clear. But thoughtful execution, grounded in market signals, technical readiness, and policy alignment will determine whether this flexibility revolution delivers on its promise.
Germany's solar sector is at a crossroads. Without storage, revenues will erode as capacity grows. With storage, solar projects become more resilient, public budgets become more efficient, and the energy system becomes more reliable. The choice is not just economic—it's strategic.
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