Europe's battery boom is proving that storage can help lower peak power prices. But unless government policy changes, battery systems may simply profit from fossil-fuel use instead of helping to eliminate it, says European public policy institute Center for the Study of Democracy geoeconomics programme director Martin Vladimirov.

Battery energy storage systems (BESS) have proliferated in recent years, reshaping how profits are shared in the electricity market. Global storage capacity grew 66% last year to almost 302 GW, up 150-fold in a decade. Falling
production costs are changing batteries from expensive renewable add-ons into game changers that are revolutionizing the structure of the power market.

Europe is a case in point. The continent installed 36 GWh of battery storage last year, bringing its total above 100 GWh, a tenfold rise, according to SolarPower Europe, which expects additions to exceed 50 GWh in 2026.

Much of that investment remains concentrated in a few markets, led by Germany, Bulgaria and Italy. While natural gas benchmarks still largely determine European power prices, battery systems in those markets are quickly eroding that dominance.

That’s because batteries are — in power industry terms — cutting the head off “the duck”. The so-called "duck curve" describes the typical pattern for European power prices. They usually fall to zero or below during sunny hours as surplus solar power floods the market, then rise with evening demand as fossil-fuel plants, mostly coal- and gas-powered, replace solar PV output.

Increasingly, batteries are absorbing surplus electricity during peak PV production – so buying power when it’s cheap – and then discharging it during evening hours when it can fetch a much higher price. This flattens the price curve, as battery systems profit handsomely from decapitating the “duck”.

And profit they do, Vladimirov says. European carbon costs make electricity prices in those evening hours – when most of the power is still coming from fossil fuels – particularly expensive. This has been amplified this year by soaring gas prices related to the Iran war-driven global energy squeeze.

For example, in Bulgaria, where batteries account for more than 20% of installed generation capacity, one of the world's highest storage shares, BESS can now capture spreads exceeding €100 per MWh based on data analysis from the Bulgarian power exchange, IBEX.

Consumers have benefited as well. Bulgarian power prices have already fallen around 15% relative to neighbouring markets over the last six months. Battery systems have made more electricity available during what are usually the most expensive evening hours, according to data from Bulgaria's transmission system operator.

Bulgaria is not alone. Other European countries are experiencing similar price dynamics, including Spain, Portugal,
Italy, Britain and Germany where batteries are absorbing surplus wind and solar electricity that would otherwise be curtailed by the grid operators.

FOSSIL FUEL PARADOX

BESS are expected to facilitate the energy transition, by reducing the volatility inherent in many renewables. But what the above spreads show is that, in many leading markets, battery systems are benefiting from the very fossil-fuel dependence they promise to eliminate.

Meanwhile, European Union governments are propping up this system by quietly subsidising coal and gas through complicated power capacity mechanisms intended to maintain grid stability.

These mechanisms keep fossil-fuel-powered plants running despite their uncompetitive pricing outside of evening hours or the coldest months.

The EU last month approved Germany's 15-year, €35.2-billion capacity mechanism to guarantee grid stability and long-term security of supply. Moreover, Italy, where gas supplies roughly 38% of electricity, paid roughly €1.8-billion through its long-standing capacity mechanism in 2025. The country recorded some of Europe's highest power prices last year.

From a political perspective, these government efforts are understandable. Total grid decarbonisation may be the future goal, but European leaders may be loath to do anything today that could appear to threaten energy security, even if those risks may be overstated. The blackout on the Iberian peninsula last year may not have been caused by renewables, but that didn't stop many from blaming them.

WHAT’S NEXT?

What other options might European leaders have?

Scaling battery storage could potentially enable 24-hour green electricity. However, this would likely require governments to remunerate BESS operators for the critical role they’re playing in maintaining dependable, affordable energy.

That’s because the spread of battery systems – and the elimination of the lucrative fossil-fuel window – would likely
erode BESS margins substantially.

Technical improvements would also be needed. Many battery systems store only two to three hours of full-power output. This requires European grids to adopt still prohibitively expensive long-duration energy storage (LDES) technologies — such as iron-air or redox flow batteries — that can discharge continuously for 10 to 100+ hours to manage multi-day grid imbalances.

But even the most advanced batteries will not be able to sustain solar-heavy systems through prolonged winter lulls. This strengthens the case for diversified renewables, including wind that operates overnight and often produces more power in the winter.

Battery storage is likely to anchor the energy transformation and the eventual phasing out of fossil fuels, but, for now, it’s profiting from their survival. Whether batteries can deliver the energy transition they are promising will be a matter of political will to overcome the vested fossil fuel interests.