EXECUTIVE SUMMARY
Researchers evaluating a 15 MW solar plant with a 5 MW/10 MWh BESS in Germany found that grid-based arbitrage increased battery revenues by about 64% over restricted peak shaving. Combining arbitrage with Frequency Containment Reserve increased revenues by about 276%, highlighting the economic impact of operating restrictions under Germany’s Innovation Tender.
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A study published in the Journal of Energy Storage has examined how different operating strategies affect the economics of co-located utility-scale solar and battery energy storage systems in Germany. Researchers Finn Mattis Wesemeyer and Max Rettenmeier have modelled a representative 15 MW photovoltaic plant combined with a 5 MW/10 MWh, two-hour BESS in Brandenburg.
The analysis has compared three operating strategies: peak shaving under Germany’s Innovation Tender restrictions, unrestricted grid-based energy arbitrage and revenue stacking combining external arbitrage with participation in the Frequency Containment Reserve market. The study has used historical photovoltaic generation and electricity-market data, applying a rolling-horizon mixed-integer linear programming model to optimise hourly battery operation.
Under the Innovation Tender framework assessed by the researchers, the battery can only charge from its co-located renewable generation source rather than from the public grid. The study found that this restriction limits battery utilisation and reduces the number of available arbitrage opportunities.
For the comparable period from July 2020 through 2023, peak shaving generated EUR 696,517 in additional BESS revenue. Allowing external arbitrage increased additional revenue to EUR 1.15 million, around 64% above peak shaving. Combining external arbitrage and FCR produced EUR 2.62 million, representing an increase of approximately 276% over peak shaving.
The financial analysis showed substantial differences between the operating strategies. Peak shaving produced an internal rate of return of −1.08%, while external arbitrage achieved 4.04%. The combined external arbitrage and FCR strategy reached an IRR of 15.12%, exceeding the study’s assumed weighted average cost of capital of 10.77%.
The researchers also estimated that removing the grid-charging restriction could lower the required support premium for the modelled configuration from EUR 0.0326/kWh to approximately EUR 0.0250/kWh. Applied to capacity awarded in Germany’s May 2025 Innovation Tender, the model estimated potential annual support savings of around EUR 3.7 million.
The authors conclude that allowing greater market-based operation could improve BESS utilisation and reduce subsidy requirements without necessarily preventing batteries from providing the intended time-shifting of solar generation. However, the study notes that its historical backtesting and perfect-foresight assumptions mean the results should not be treated as forecasts of future profitability.