BESS Case Scenario: Complex Terminology & Sensible Battery Concepts for the Energy Transition

BESS: four letters, numerous use cases

One often encounters the abbreviation BESS for Battery Energy Storage System, especially in an international context. While internationally this usually refers to large-scale, grid-connected storage systems, in Germany BESS is sometimes also used for smaller batteries such as home storage systems. However, what most battery concepts have in common is that they can play a decisive role in the energy transition by buffering the fluctuating power generation of renewable energies such as photovoltaics (PV) and wind energy, and thus relieving the burden on the power system. And this is true even if they were originally built for a different purpose. Let's take a closer look at the use cases behind the frequently used terminology.

Peak shaving

The term peak shaving refers to the targeted reduction of peak loads in industrial or commercial settings. Companies with energy-intensive processes often use battery storage to cushion peak loads in their own electricity consumption and thus reduce energy costs. In times of low electricity costs , or when there is surplus generation from the company's own renewable energy systems ,the storage systems are charged. When the energy-intensive processes or machines are running, the energy from the storage system is used. In this way, companies reduce the maximum grid load, and save significantly on their grid fees. In addition to this primary benefit, the flexibility potential of battery storage can also be exploited on the electricity or balancing energy markets. Together with a selling company, a corresponding roadmap is then developed that does not interfere with the primary purpose but specifically uses unused periods to increase revenue.

Arbitrage with battery storage

The term “arbitrage” is also frequently used in connection with the marketing of battery storage. What does it mean? Those who engage in arbitrage attempt to make profits by exploiting price differences for a commodity on different marketplaces. In the case of batteries, this can look as follows: Battery storage systems charge electricity at times when prices are low. For example, when there is a high feed-in of renewable energies, and sell it again when prices rise. This strategy not only enables economic profits for storage operators, but also contributes to smoothing price fluctuations on the electricity exchanges and to grid stability. This type of marketing is particularly relevant for stand-alone battery storage systems, i.e., storage systems with their own grid connection that are not coupled with renewable energies and draw electricity from the grid.

Redispatch

Redispatch is a measure to avoid grid bottlenecks, in which transmission system operators (TSOs) or distribution system operators (DSOs) intervene in the feed-in capacity of power plants in a targeted manner. Since the introduction of Redispatch 2.0, renewable energies and storage facilities with a capacity of 100 kW or more have also been integrated into congestion management. Battery storage systems can be used to benefit the grid by absorbing excess electricity or feeding energy into the grid when needed. In practice, however, this potential is currently only being exploited to a limited extent, as the regulatory framework still offers too few incentives for storage operators. In the future, however, this could open up an interesting field for battery storage, especially for systems that are particularly affected by redispatch.

Curtailment

The curtailment of renewable energy plants may become necessary when the supply of electricity exceeds demand. Such scenarios occur regularly, especially in spring and summer, given the rapid expansion of solar power.

Instead of curtailing green electricity and leaving it unused, battery storage systems can step in: they store the excess electricity and release it later when the grid is relieved or electricity consumption picks up again, or when production falls and prices rise. This approach not only reduces the waste of renewable energy, but also improves the economic efficiency of the plants. Accordingly, the addition of battery storage systems, known as co-location, is becoming increasingly attractive, especially for solar plant operators. However, there are a number of factors to consider when designing a co-location, which in turn is reflected in a colorful spectrum of terminology.

Co-location: a clever combination of storage and PV systems

Sunny days are increasingly causing gloomy moods on the electricity exchanges and among solar plant operators: when a lot of solar power flows into the grid, prices are increasingly falling into negative territory. This not only depresses the market value of solar power, but can also cost the EEG market premium under certain circumstances.

A possible solution? The addition of a storage facility at the grid connection point of the solar system, known as co-location. This allows the feed-in to be aligned with the prices on the electricity market: electricity is only fed in when exchange prices are high; when prices are low or negative, it ends up in storage. Depending on the setup, other business models such as arbitrage and extensive participation in the balancing power markets are also possible.

There are various regulatory approaches to implementing a co-location project – and these differ significantly not only in their wording but also in their marketing.

Co-location with green electricity storage (CoLo Green)

In this variant, a storage facility is added to an existing PV system in such a way that it is only charged with solar power. The advantage: the stored electricity remains “green” and continues to be eligible for subsidies under the EEG. In addition, this so-called “CoLo Green” is legally uncomplicated to implement.

The catch: without grid power, the possible applications are limited – and so are the potential revenues.

Co-location gray power storage (CoLo Grey)

As the name suggests, “CoLo Grey” not only uses solar power, but also charges the storage system with electricity from the grid. This makes the system more flexible, increases revenues, and even enables participation in the balancing energy market. With this type of system combination, the storage system can be considered stand-alone, but is subject to greater restrictions due to the sharing of the grid connection with the PV system.

The disadvantage: the stored electricity is no longer considered “green” and thus loses its EEG subsidy (gray electricity storage). In addition, a more complex metering concept is required to clearly separate the PV system and the storage unit.

Multi-use storage (CoLo Multi)

From mid-2026, it is expected that it will be possible to combine the advantages of CoLo Green and Gray, with a so-called multi-use storage system in accordance with Section 19 (3b) of the Renewable Energy Sources Act. Under certain conditions, the storage system will then also be allowed to draw grid power, without the stored solar power losing its green power quality.

Co-location innovation tender (CoLo Inno)

In contrast to the co-location models, in which storage is added to an existing PV system, the innovation tender under EEG § 39 focuses on new, system-friendly overall solutions. Funding is available for projects that integrate innovative technologies , such as the combination of PV and storage, and contribute to grid stability.

Participation is via a tender process that takes place twice a year. Important: As with CoLo Grün Green, no electricity may be drawn from the grid.

Cross-market: more markets, higher revenues for battery storage

Last but not least: the concept of “cross-market optimization.” Cross-market (also called multi-market, X-market) refers to simultaneous participation in several electricity markets. This means that battery storage systems can not only be used in the day-ahead and intraday markets of Epex Spot, but can also provide capacity reserves and power on the balancing energy market. The grid operator then calls on these reserves when there is unexpectedly less generation than anticipated or when more electricity than forecast flows into the grid. The concept of cross-market optimization is particularly relevant for stand-alone storage facilities.

The aim of cross-market optimization is to make optimum use of the flexibility of the storage facility and maximize revenues by diversifying marketing channels. At the same time, risk is spread, as fluctuations in one market can be offset by others.

The development and implementation of cross-market strategies is technically and regulatorily challenging and requires cooperation with an experienced marketer. For example, the provision of balancing energy not only requires specific market access, but the battery must also undergo a prequalification process to prove its technical suitability before it can be used.

For successful marketing on multiple trading platforms, electricity prices, call probability, and grid loads must also be reliably forecast in order to coordinate the use of battery storage in the best possible way. This, in turn, requires complex SOC management (SOC = state of charge, i.e., the management of the storage level), taking into account technical restrictions such as cycles and the regulatory requirements of the TSOs.

Conclusion

Battery storage systems are proving to be truly versatile when used in combination with renewable energies. They can relieve the burden on the electricity system by reducing feed-in peaks and better balancing supply and demand as part of demand-oriented feed-in. In this way, they are also a valuable expansion option for operators to counteract declining revenues in direct marketing. At least when it has been possible to find the right marketing concept for each individual case among the wealth of terminology. If you would like to develop your BESS case scenario, we will be happy to support you in all aspects of marketing your battery storage system.

Note: Next Kraftwerke assumes no liability for the completeness, accuracy and timeliness of the information. This article is for information purposes only and does not replace individual legal advice.