Between new State Aid and more rules: The Clean Industrial Deal and energy storage

Key Takeaways: Between new State Aid and more rules: The Clean Industrial Deal and energy storage

Executive Summary

The 9th iteration of the MSR European Market Monitor for Energy Storage, presented by Tom Smout and his team at LCP Delta, provides a comprehensive analysis of the energy storage market across Europe. The report covers capacity forecasts, market trends, and policy analysis for various countries. Key drivers of storage deployment include policy incentives, falling costs, and the rise of renewables. Germany and Italy lead in storage capacity, with significant growth in both front-of-the-meter and behind-the-meter markets. Despite challenges such as high energy prices and the removal of subsidies, the residential battery storage market is expected to recover from 2027 onwards. The commercial and industrial storage market is driven by electrification and grid congestion, with notable growth in the Netherlands and Sweden. The report highlights the importance of policy and state aid in shaping the market, with significant growth expected through 2025 and beyond, driven by support schemes and new business models. The forecast indicates a pan-European rollout of storage capacity, with substantial volumes anticipated in Italy and Poland towards 2030.

Speakers

Tom Smout, Head of Storage, LCP Delta
Silvestros Vlachopoulos, Energy Storage Research Manager, LCP Delta
Eibhilín Cadogan, Battery Storage Research Lead, LCP Delta
Jacopo Tosoni, Head of Policy, EASE

Key Takeaways

1. European Storage Analysis: 9th iteration of the MSR European Market Monitor for Energy Storage provides a comprehensive analysis of energy storage across Europe, including capacity forecasts, market trends, and policy analysis.

2. Germany Italy Leaders: and Italy are leading in storage capacity, with significant volumes in both front-of-the-meter and behind-the-meter storage.

3. Residential Market Challenges: battery storage market faces challenges such as high energy prices and removal of key subsidies, but is expected to recover from 2027 onwards due to sustained awareness of self-sufficiency and energy management.

4. Industrial Storage Growth: and industrial battery storage market growth is driven by electrification, grid congestion, and declining battery costs, with notable growth in countries like the Netherlands and Sweden.

5. 2025 Deployment Forecast: forecast for 2025 shows significant growth in energy storage deployment, particularly in Great Britain and Germany, driven by grid booster projects and clearing construction queues.

6. 2026 Deployment Peak: period from 2026 to 2027 is expected to see a peak in deployment due to support schemes, followed by a drop in 2027 as these schemes wind down.

7. Policy Shaping Market: aid and policy play a crucial role in shaping the energy storage market, with the European Union's efforts to streamline support schemes and ensure market reforms making energy storage viable.

Key Quote

If you think about it like some of the capacity market is needed because you have a renewable energy roll out and the simulators are worried about capacity, right or particular schemes like Maxi happens just because renewable deployment in Italy is in the South and demand is in the north. You know, it provides the volatility that will make the return of investment.

Related Content

Explore Related Content.

Webinar

Watch Full Webinar here.

European Energy Storage Market: Key Drivers and Future Projections

Energy storage is becoming a critical component in the European energy landscape, driven by the deployment of renewable energy sources and the need for grid stability. The European Market Monitor for Energy Storage (MSR) provides an in-depth analysis of the current state and future projections of energy storage across Europe. This blog delves into the key insights from the latest MSR report, highlighting trends, challenges, and opportunities in the sector. Significant transformations are occurring in the market due to technological advancements, policy changes, and market dynamics. Understanding these factors and their impact on future growth is essential for industry stakeholders.

European Energy Storage Market Growth and Trends

The energy storage market in Europe is experiencing significant growth, with a projected total installed capacity of around 89 gigawatts by the end of 2024. This includes a variety of technologies such as pumped hydro storage, electrochemical storage, and large-scale thermal storage. Pumped hydro storage remains the leading technology, accounting for 53 gigawatts of the total capacity, while electrochemical storage, particularly lithium-ion batteries, is rapidly expanding and now represents a substantial portion of the market. Deployment varies across Europe, with Germany and Italy leading in both front-of-the-meter and behind-the-meter storage installations.

The increasing penetration of renewable energy sources like solar and wind, which are inherently intermittent, is a primary driver of energy storage deployment. Energy storage systems balance supply and demand, ensuring grid stability and reliability. Policy incentives and regulatory frameworks are crucial in promoting energy storage. For example, capacity markets and auctions in countries like Italy provide financial incentives for storage projects. Additionally, falling costs of storage technologies and changes in commodity prices further drive the adoption of energy storage solutions.

The residential battery storage market is a significant segment within the behind-the-meter storage space. In 2024, approximately 6.4 gigawatts of residential battery storage were installed across Europe, with Germany and Italy leading the markets due to strong policy support and high levels of solar PV installations. The market is expected to experience a temporary decline due to the phasing out of subsidies in some countries and the stabilization of energy prices. Despite this, the long-term outlook remains positive, with market recovery anticipated from 2027 onwards, driven by decreasing technology costs, increased electrification, and new business models.

The commercial and industrial (C&I) battery storage market, although smaller than the residential and front-of-the-meter segments, is growing rapidly. In 2024, nearly 530 megawatts of new C&I storage capacity were added. The electrification of heating and mobility is driving higher peak loads, leading businesses to turn to storage to manage grid capacity constraints. Additionally, the co-location of storage with solar PV systems is becoming increasingly common in the C&I space. Countries like the Netherlands, which face severe grid congestion, are seeing significant growth in C&I storage as businesses seek to circumvent the need for additional grid capacity.

Looking ahead, the European energy storage market is set for substantial growth. By 2030, an additional 128 gigawatts of electrochemical storage is expected to be added to European grids. This aggressive growth forecast is driven by the continued deployment of renewable energy, supportive policy frameworks, and advancements in storage technologies. The implementation of new electricity market designs and the increasing adoption of dynamic tariffs will further accelerate the sector. As the market evolves, energy storage will play an increasingly vital role in ensuring a resilient and sustainable energy system in Europe.

Energy Storage Market Growth and Trends

In recent years, the energy storage market has seen significant growth in deployment, particularly in Europe. Leading countries such as Germany, Sweden, and Italy have driven this momentum through lucrative revenue streams from ancillary services and capacity market contracts. Despite facing challenges like project delays and slower-than-expected deployment rates, the overall trend remains positive. For example, Great Britain experienced a push of forecasted capacity from 2024 to 2025, underscoring the unpredictable nature of project timelines. The market is increasingly emphasizing longer-duration storage systems and more sophisticated revenue models.

Looking ahead to 2025, substantial growth is anticipated, nearly doubling the capacity deployed in 2024. This expansion will be fueled by the clearing of construction queues in Great Britain, significant projects in Germany, and new deployments in the Nordics and other smaller markets. Support schemes, especially those leveraging the recovery and resiliency facility, will be crucial in driving this growth. Market fluctuations are expected, with deployment peaks driven by specific support schemes followed by slowdowns as these schemes conclude.

Beyond 2025, the market dynamics will continue to evolve with a growing focus on collocation of storage with other technologies. Collocation with conventional generation, such as gas plants or hydro, offers advantages in permitting and grid connection. Meanwhile, collocation with renewables is projected to strengthen towards 2030, driven by the need for balancing and decreasing storage technology costs. Policy will significantly influence this trend, with factors like negative pricing periods and curtailment rates affecting the feasibility and attractiveness of collocation projects.

The European energy storage market is currently experiencing transformative growth, driven by renewable energy deployment, policy incentives, and technological advancements. Despite challenges like subsidy phase-outs and grid capacity constraints, the long-term outlook is positive. Energy storage expansion is essential for transitioning to a low-carbon energy system, enhancing grid stability, and integrating renewable energy. As the market matures, collaboration among stakeholders across the value chain will be vital to addressing challenges and capitalizing on opportunities. The future of energy storage is promising, with significant potential to support a more sustainable and resilient energy system.