Energy storage does not exist in a vacuum. Its profitability depends on market rules, taxes, and subsidies. The Germany energy storage market is heavily influenced by German and EU regulations.
The Renewable Energy Sources Act (EEG)
The EEG is the primary law for renewable energy. The Germany battery energy storage market is affected by: (1) Feed-in tariffs (FiT) for solar (declining, no longer available for new systems), (2) Direct marketing (selling solar power on the wholesale market), (3) Grid fees (exemptions for self-consumed solar from batteries). The EEG has been amended many times. The current version encourages self-consumption and behind-the-meter batteries. It also supports co-located storage with wind farms.
The Grid Fee Exemption
Electricity from a home battery that is charged from on-site solar and then consumed is exempt from grid fees (which add a significant amount per kWh). The Germany energy storage market sees this as a key driver for residential batteries. Without the exemption, self-consumption would be less attractive. The exemption is controversial (grid fees pay for grid maintenance). The government has capped the exemption. The future of the exemption is uncertain.
The "Kraft-Wärme-Kopplungsgesetz" (KWKG)
The CHP law (KWKG) supports combined heat and power (CHP) plants. The Germany energy storage system market notes that storage can be combined with CHP. For example, a battery can store electricity from a gas-fired CHP plant, allowing the CHP plant to operate at optimal efficiency. The KWKG does not specifically address storage, but the combination is eligible. The law is due to be revised.
The Market Master Data Register
All power generation units and storage must be registered. The Germany battery storage market uses the register to: (1) Track capacity, (2) Avoid double counting of feed-in, (3) Enable statistical reporting. The registration process is online. The operator must provide technical data (capacity, power, inverter type). The register is managed by the Federal Network Agency (BNetzA). It is mandatory.
Wholesale Electricity Market (EPEX Spot)
Large batteries can participate in the day-ahead and intraday markets. The Germany renewable energy storage market uses EPEX Spot to: (1) Arbitrage (charge when prices are low, discharge when high), (2) Provide balancing energy (if qualified). The battery must be able to forecast prices and schedule bids. The market is competitive. The price spread (between day and night) has decreased as renewables have grown. Batteries must also provide ancillary services to be profitable.
Balancing Energy Markets (Primary, Secondary, Tertiary)
The TSOs procure balancing energy (frequency regulation). The Germany energy storage system market sees batteries as ideal providers. The qualification process is rigorous: (1) The battery must pass a prequalification test (proving its response time and accuracy), (2) The battery must have a certified control system (with connection to the TSO), (3) The battery must provide a performance bond. The market is open to all technologies. The TSOs auction capacity weekly or daily.
The Role of the Federal Network Agency (BNetzA)
BNetzA regulates the electricity market. The Germany grid battery market is subject to BNetzA decisions on: (1) Grid fees, (2) Market design, (3) Grid connection rules. BNetzA has issued guidelines for storage: (1) Storage is a "grid resource" (not generation or consumption), (2) Storage can be located behind the meter or on the grid, (3) Storage can provide multiple services. BNetzA's decisions are critical for the business case.
The European Union Framework (Clean Energy Package, RED, EED)
The EU sets targets and directives. The Germany energy storage market is influenced by: (1) Renewable Energy Directive (RED III), (2) Energy Efficiency Directive (EED), (3) Electricity Market Design (EMD) regulation. The EU promotes storage as a key flexibility option. The EMD requires TSOs to consider storage in network planning. The RED III allows storage to be counted as renewable (if storing renewable electricity). The EU framework is generally supportive.
The Carbon Price (EU ETS)
The EU Emissions Trading System (ETS) puts a price on CO2. The Germany battery storage market is indirectly affected: (1) A high CO2 price makes gas generation more expensive, increasing the price spread between off-peak (renewables) and peak (gas), (2) Storage can arbitrage this spread. The CO2 price is volatile. It is a supporting factor for storage but not the main driver. The EU ETS also applies to some small installations (not storage itself).
Subsidies and Grants (KfW, BAFA)
The government provides subsidies through KfW (development bank) and BAFA (Federal Office for Economic Affairs and Export Control). The Germany renewable energy storage market has benefited from: (1) KfW 275 (solar + battery for residential), (2) KfW 440 (storage for commercial and industrial), (3) BAFA funding for large-scale storage (from the EU Innovation Fund). Subsidies reduce the upfront cost. They are typically time-limited. The current programs are funded until a certain year.
Tax Treatment of Storage
The tax treatment of storage is complex. The Germany energy storage system market notes: (1) Storage used for self-consumption is not subject to electricity tax (on the stored portion), (2) Storage that charges from the grid and discharges later (arbitrage) may be subject to electricity tax and grid fees (on the charged portion). The government has simplified the rules for small storage. For large storage, the tax burden can affect profitability. The rules are under review.
The Future: Capacity Markets (vs. Energy-Only Market)
Germany has an "energy-only market" (generators are paid for the energy they produce, not for being available). The Germany grid battery market sees that some countries have "capacity markets" (pay generators for being available, even if not used). Germany has resisted capacity markets, but is considering a "capacity mechanism" for security of supply. Storage could participate in a capacity market. The debate is ongoing. The Germany energy storage market is a policy-driven market. And the Germany battery energy storage market will continue to be shaped by regulations, subsidies, and market design, as Germany strives to achieve its energy transition goals.
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