'Merchant Business Case Proven, but Tougher Financing Environment': 8Energies on the German BESS Market
8Energies' Maximilian Hüls says the German BESS merchant case is real - but 2026 has brought a harder financing environment, aFRR saturation, and a regulatory overhang that lenders can't yet model.
Tomas Renner (AI)Energy Storage Correspondent
Covers grid-scale and behind-the-meter storage: BESS projects, cell chemistry, duration, safety standards and storage market economics.
The German battery storage market has spent the last three years building a merchant business case from scratch. Now, according to one developer who has actually closed debt on a fully merchant project, the case is proven - and the financing environment has simultaneously gotten harder.
That's the candid read from Maximilian Hüls, chief of staff at BESS developer and operator 8Energies, speaking ahead of the Energy Storage Summit Germany 2026 in Berlin this September[1]. The tension he describes - a market that works operationally but is increasingly difficult to finance - is the defining story of German utility-scale storage right now.
What 'Proven' Actually Means
The merchant case in Germany is built on a structural fact: the grid has more solar than it can absorb at midday, and not enough flexible capacity to fill the gap when the sun goes down.
Germany recorded 573 hours of negative electricity prices in 2025, up from just 69 in 2022. Solar capture rates have fallen below 60%, and intraday spreads regularly exceed €150/MWh within a single hour[1]. Those numbers are not projections - they are the realized market conditions that BESS operators are already monetizing.
Cross-optimizing across day-ahead, intraday, FCR, and aFRR delivered revenue rates as high as €200,000/MW/year in 2024, according to Modo Energy backtests. Germany's continuous intraday market, which runs until five minutes before delivery, gives optimizers more shots at capturing those spreads than almost any other European market.
8Energies has skin in the game. The firm reached ready-to-build status on its first project - an 11.5MW/23MWh system in Baden-Württemberg - eight months ago, and closed financing on it at 70% loan-to-value with senior debt on a fully merchant basis[1]. Two years ago, that structure would have been essentially impossible to execute. The fact that it happened is the clearest evidence yet that lenders have genuinely moved.
What 'fully merchant' means in practice: No contracted offtake, no tolling agreement, no floor contract. Revenue comes entirely from energy trading and ancillary services markets. Lenders price that risk into the structure — typically through tighter covenants, cash-sweep mechanisms, and higher margins — but they are now willing to commit.
The Flip Side: Saturation Is Arriving
Hüls is equally direct about what's changed since the start of 2026. Revenues are coming down, and the first saturation effects are clearly visible - above all in the secondary reserve market, aFRR[1].
This is not a surprise to anyone watching the market closely. Germany's ancillary services markets (FCR and aFRR combined) represent roughly 4-4.5 GW of total capacity. Battery qualification in those markets has grown sharply, and the TSOs are not expanding procurement volumes to match. When supply outpaces a fixed-size market, prices fall - and they are falling.
In 2026, around 55% of German BESS revenue still comes from ancillary services, but market analyses project that by 2030 the lion's share - up to 95% - will come from day-ahead and intraday trading. The transition is not optional; it is arithmetic.
The operational consequence of this shift matters for project sizing. A 1-hour or 2-hour system optimized for FCR and aFRR looks very different from a 2-hour-plus system built to capture intraday spreads. Longer duration gives the optimizer more flexibility to time charges and discharges around the 15-minute market time units Germany adopted in September 2025 - a structural change that creates granular arbitrage opportunities that simply didn't exist under the old hourly settlement regime.
The Financing Environment: Three Compounding Problems
The harder financing environment Hüls describes is not one thing. It is at least three things arriving at once.
1. Revenue compression in the near-term anchor market. Lenders underwrite against forecast revenues. When aFRR prices compress, the near-term cash flows that anchor debt service coverage ratios shrink. That doesn't kill deals, but it tightens headroom and pushes lenders toward more conservative structures.
2. The grid fee overhang. For most of 2026, the single biggest financing blocker in Germany has been regulatory uncertainty around what happens to grid fees after the current exemption expires in August 2029. In January 2026, BNetzA published a discussion paper suggesting that even projects already in operation could be subjected to new fees - a proposal that brought many financing processes to a standstill, because lenders cannot size debt around a regime they cannot model.
BNetzA published its draft decision on long-term grid fees on 6 August 2026, just as the 8Energies Q&A was published[1]. The draft brought meaningful clarity: operators of BESS assets coming online after 4 August 2029 can expect a capacity grid fee of approximately €4-7/kW/year, with no energy-based component, and grandfathering protection confirmed for projects reaching a final investment decision before the new regime enters force. That is considerably less burdensome than the worst-case scenarios the market had been pricing in. But important questions remain - particularly around Flexible Connection Agreements (FCAs) and construction cost contributions - and the final fee values may not be fully confirmed until late 2028.
3. The grid connection queue. Germany has approximately 78 GW of BESS capacity approved in the connection queue, with only around 2.5 GW actually connected. Most new standalone projects face years of delay. That queue dynamic forces developers toward co-location structures or FCA-constrained connections - both of which introduce operational constraints that lenders have to model carefully. A 15-minute ramp-rate limit, for instance, cuts lifetime revenues by more than 10% according to Modo Energy modelling.
What the Market Is Actually Building
Despite the tougher environment, capital is still moving. Germany's operational BESS fleet grew from under 1 GW to over 2.5 GW by end-2025, with annual additions accelerating sharply year on year.
Eco Stor reached financial close on a 300MW/718MWh project in Förderstedt, Saxony-Anhalt - the largest BESS project to be financed in Germany to date - with debt provided by Banco Santander and NORD/LB, and no public subsidies. Commissioning is targeted for 2027. That deal is a proof point that the market can absorb large-scale merchant risk when the project is structured correctly.
The projects getting financed share some common characteristics: they are large enough to benefit from optimisation across all five German market gates (FCR, aFRR, day-ahead, intraday, redispatch); they have grid connections that are either already secured or structured under FCAs with defined constraints; and they are built around LFP chemistry, which offers lower capital costs and better cycle life than the NMC systems that dominated earlier builds.
A capacity market, expected around 2028, could add a layer of contracted revenue that makes the financing math easier - particularly for longer-duration systems. But that is still two years away, and developers cannot wait for it.
The Honest Assessment
What 8Energies is describing is a market in transition between two revenue regimes. The ancillary services window that made early German BESS projects straightforward to underwrite is closing. The wholesale arbitrage opportunity that replaces it is real - the price signals are there, the market structure supports it - but it is harder to model, harder to contract around, and therefore harder to finance.
The BNetzA draft decision on grid fees is a genuine positive step. It removes the worst-case regulatory scenario from the table and gives developers with projects in the pipeline a clearer path to FID. But it does not resolve the grid connection queue, and it does not make aFRR revenues recover.
The developers who will close deals in this environment are the ones who can demonstrate to lenders that their revenue stack is not dependent on ancillary services holding up, that their grid connection is real and constrained in ways that are modellable, and that their optimisation strategy is built for the intraday market that Germany is becoming - not the FCR market it used to be.
8Energies closing a fully merchant deal at 70% LTV on an 11.5MW/23MWh project is a data point worth taking seriously. It shows the financing is possible. It does not mean it is easy.
What is the current grid fee exemption for BESS in Germany?
Under Section 118(6) of the German Energy Act (EnWG), BESS projects reaching commercial operation before 4 August 2029 are fully exempt from grid fees for 20 years from commissioning. BNetzA's August 2026 draft decision confirmed that grandfathering protection will be preserved for projects in development, provided a final investment decision is reached before the new AgNes regime enters force.
Why is aFRR saturation a problem for German BESS projects?
The aFRR market is a fixed-size market — TSOs procure a set volume of balancing capacity regardless of how many batteries qualify to provide it. As more BESS capacity enters the market, supply exceeds demand and capacity prices fall. The combined FCR and aFRR market is roughly 4–4.5 GW. With Germany's BESS fleet growing rapidly, that ceiling is being approached faster than most developers modelled.
What does a 'fully merchant' BESS financing mean?
A fully merchant project has no contracted revenue — no tolling agreement, no floor contract, no capacity payment. All revenue comes from energy trading and ancillary services markets. Lenders price this risk into the debt structure, typically through tighter covenants and higher margins, but they are now willing to commit to such structures in Germany, as 8Energies' Wehr project demonstrates.
What revenue can a German BESS project expect in 2026?
Modo Energy estimates fully merchant BESS earns €115–130k/MW/year under central assumptions in 2026, dropping to around €70k/MW/year in a low scenario. A 2-hour system optimised across all revenue streams could earn up to €240k/MW/year near-term, but that figure is expected to decline to around €115k/MW/year by 2030 as ancillary markets saturate and wholesale arbitrage becomes the dominant driver.
