According to Bloomberg New Energy Finance's report, "Europe Energy Storage Market Overview 2024," significant developments are expected in the energy storage market next year. To achieve a 10% return solely through arbitrage, two-hour batteries developed in 2024 must achieve an average price difference of €114/MWh throughout their lifecycle.
From January to August 2024, two-hour batteries in the European market can expect an average minimum-to-maximum price difference of €78/MWh. Since 2022, European countries have approved €22 billion in state aid to support energy storage project development.
The price spread, which had fallen from record levels in 2022, is expanding again this year. This growth is partly due to increased solar power penetration, lowering daytime electricity prices in markets like Germany and Spain. The arbitrage business model—charging during cheap electricity periods and discharging when prices are high—benefits further from declining battery prices. Two-hour and four-hour storage systems favored for arbitrage applications are becoming more economical.
While frequency response still provides most project revenues, an oversupply could lead to price drops. The UK is already experiencing such changes in its energy storage business landscape.
In addition to the expanding price spread, falling battery prices have improved the viability of arbitrage-based projects. To meet investor targets, two-hour batteries developed in 2024 need an average daily price difference of €114/MWh ($127/MWh) over their lifecycle, down from over €150/MWh in 2023.
Despite improvements, the price difference alone is insufficient to support most projects in the market. However, Southern and Eastern European markets like Hungary and Romania, where gas-fired power generation costs are high, are exceptions due to particularly high peak prices.
Even in markets with significant price fluctuations, developers are slow to build without income certainty, necessitating continued government support. Over €22 billion in state aid has been approved since 2022, with more than €20 billion announced in the past year.
