Shifting Revenue Dynamics in Battery Storage Trading
Extreme price volatility, intensifying competition in ancillary services markets, and the rapidly growing number of battery storage systems are clearly reshaping the market environment in 2026. This shift is affecting not only the level of achievable revenues, but also the markets in which flexibility creates the greatest value.
While ancillary services remain the most important revenue source for battery storage systems in 2026, recent backtests show a clear shift in the composition of revenue streams. In particular, revenues from the aFRR Energy market are declining due to increasing competition and the significant growth in prequalified battery storage capacity. At the same time, spot markets – especially the Day-Ahead market – are becoming increasingly important, partially offsetting this decline.
This shift also has implications for battery storage system design. As spot market strategies become more important, storage duration is becoming an increasingly important driver of revenue potential.
Total Revenues Increase with Longer Storage Duration
The additional value of longer storage duration is directly linked to the changing revenue mix. As revenues from pure capacity provision come under increasing competitive pressure and energy-intensive applications such as Day-Ahead arbitrage gain relative importance, greater energy capacity becomes increasingly valuable. Longer-duration storage systems can capture price spreads over more hours and allocate their flexibility more effectively across spot and ancillary services markets.
Our backtests for the period from July 2025 to June 2026 show that longer storage duration improves the economics of battery storage systems. BESS with three or four hours of storage duration generate higher total revenues than comparable 2-hour systems.
Compared with a 2-hour system, total revenues for a 3-hour system increase by 12.6 % to €283.9k, while a 4-hour system achieves €297.7k, representing an 18.1 % revenue uplift. The incremental value of longer storage duration is therefore slightly higher than in 2025, when the corresponding uplifts were 12.0 % and 17.4 %, respectively.
Storage Duration | Total Revenue Jul 2025–Jun 2026 | Revenue Upside vs. 2 h Jul 2025–Jun 2026 | Revenue Upside vs. 2h in 2025 |
2 hours | €252.0k | – | – |
3 hours | €283.9k | +12.6 % | +12.0 % |
4 hours | €297.7k | +18.1 % | +17.4% |
Table 1: Total Revenues and Revenue Upside by Storage Duration*
Day-Ahead Gains Importance
The Day-Ahead market is becoming increasingly important for battery storage systems as the expansion of renewable energy generation leads to greater intraday price spreads. The continued growth of solar PV is a key driver of this price pattern: According to the German Federal Network Agency (Bundesnetzagentur), solar power generation in Germany increased from 63.2 TWh to 74.1 TWh in 2025, while the number of hours with negative wholesale electricity prices rose from 457 to 573.
This trend is continuing in 2026. As solar PV generation increased in spring, longer periods of very low and negative prices occurred around midday. In the evening, however, as solar generation declines while demand initially remains high, prices can rise significantly again. The extent of these price spreads was evident, for example, on May 1, when the Day-Ahead price fell as low as −€499.99/MWh.
This creates additional arbitrage opportunities for battery storage systems. They can charge during hours with low or negative prices and discharge when prices are higher. 3-hour and 4-hour battery storage systems benefit particularly from these multi-hour price windows. Compared with a 2-hour system, they can absorb larger amounts of energy over an extended low-price period and shift that energy over a longer timeframe, allowing them to capture a greater share of the available Day-Ahead price spreads.
This market dynamic is also reflected in our backtests*. For the period from July 2025 to June 2026, the share of total revenue generated in the Day-Ahead market increases significantly with storage duration:
2-hour system: 24,6 %
3-hour system: 29,5 %
4-hour system: 33,7 %
At the same time, the spot market is also gaining importance over time. Compared with the full year 2025, spot market revenues increase by approximately 6 % to 14 %, depending on storage duration, over the rolling period from July 2025 to June 2026. As a result, spot markets partially offset the decline in aFRR Energy revenues. In addition to higher revenues in the Day-Ahead market, changing dynamics in Continuous Intraday (IDC) trading also contribute to this development.
New Dynamics in Total Revenues
The growing importance of spot markets reflects the evolving dynamics of the power market and the increasing potential to unlock new revenue opportunities for battery storage systems. Over the period analyzed, however, these gains do not yet fully offset the short-term decline in revenues from ancillary services. Across all storage durations, total revenues for the rolling period from July 2025 to June 2026 remain below the levels achieved in 2025.
On a rolling-period basis, total revenues are approximately 9 % to 10 % below 2025 levels:
Storage Duration | 2025 | Jul 2025-Jun 2026 | Change |
2 hours | €279.3k | €252.0k | -9.8 % |
3 hours | €312.7k | €283.9k | -9.2 % |
4 hours | €327.8k | €297.7k | -9.2 % |
Table 2: Total Revenues by Storage Duration Compared with 2025*
The shift becomes even more pronounced when comparing the most recent half-year periods: Between the first half of 2025 and the first half of 2026, total revenues declined by 23.8 % for 2-hour systems, 23.0 % for 3-hour systems, and 22.4 % for 4-hour systems. This comparison reflects recent market developments more quickly than the rolling twelve-month view, which still includes higher-revenue months from the second half of 2025.
A key driver of this development is the changing market dynamics in aFRR Energy.
aFFR Energy in a Changing Market Environment
The most significant shift in the revenue mix can be observed in the aFRR Energy market. In this real-time balancing energy market, prequalified flexibility is activated to address short-term imbalances between electricity generation and consumption and to stabilize system frequency. As the battery storage market scales, the supply of eligible flexibility is increasing significantly: Positive aFRR capacity from battery storage systems alone increased from 0.56 GW in January 2025 to 1.20 GW in January 2026, representing growth of approximately 114 %. A comparable increase can also be observed in negative aFRR capacity. With reserve requirements remaining broadly stable, a larger supply of flexibility can intensify competition and distribute the available revenue pool across a greater volume of prequalified capacity.
At the same time, market and electricity prices naturally fluctuate due to factors including seasonality, weather conditions, and individual extreme events.
Over the relatively short observation period from the first half of 2025 to the first half of 2026, aFRR Energy revenues declined by approximately 39 % to 41 % across all storage durations. The decline was particularly pronounced in January and February, at 40 % to 48 %, and in May, at 25 % to 26 %.
As this pattern is nearly identical across all storage durations analyzed, the results point primarily to market-wide seasonal and structural factors rather than effects related to individual system configurations.
Nevertheless, ancillary services remain the largest segment in battery storage commercialization. In the latest backtest, the combined contribution of aFRR Capacity and aFRR Energy continues to account for the largest share of the overall revenue mix:
Storage Duration | Share of Total Revenue form aFRR Capacity + aFRR Eenrgy |
2 hours | 72 % |
3 hours | 68 % |
4 hours | 64 % |
Table 4: Share of Total Revenue from aFRR Capacity and aFRR Energy*
aFRR Capacity Stabilizes the Revenue Mix
The aFRR Capacity market plays a stabilizing role: Over the rolling period from July 2025 to June 2026, its revenue contribution remains stable compared with the full year 2025 and, according to our backtests, increases by 0.1 % to 1.2 %, depending on storage duration. In this balancing reserve market, capacity for automatic Frequency Restoration Reserve (aFRR) is procured and remunerated. Payments are made for making capacity available, while actual activation is settled separately through the aFRR Energy market.
The stability of the aggregate revenue contribution reflects opposing developments within the market segment. Comparing the first half of 2026 with the first half of 2025, lower revenues from Cap+ are largely offset by an 8.9 % increase in Cap− revenues.
The increase in Cap− revenues is not driven by higher market prices: Market prices for negative aFRR Capacity in the first quarter of 2026 were approximately 10% below the level recorded in the same quarter of the previous year. Instead, the increase is primarily attributable to changes in marketed volumes and activation frequency. This highlights the growing importance of operational market allocation in determining revenue performance.
It is therefore important to distinguish between market price levels and actual revenue contributions when assessing these developments. In a sequential comparison of the second half of 2025 with the first half of 2026, both Cap+ and Cap− show a downward trend – an early indication of increasing competition. At the same time, the year-on-year comparison demonstrates that different products within the segment can partially offset one another. This reinforces the importance of active and differentiated optimization within the aFRR market itself.
Conclusion: A Broader Revenue Base IS Becoming a Competitive Advantage
The battery storage market is entering a new phase of maturity: Ancillary services markets are becoming increasingly competitive, while the growing share of weather-dependent renewable generation is creating greater price spreads across time in spot markets. Our backtests illustrate how these developments are reshaping the relative revenue potential of different markets. The contribution from aFRR Energy is declining, while Day-Ahead and other spot market strategies are gaining importance.
It is precisely the interaction between these markets that creates additional optimization opportunities. For example, when tight generation conditions increase opportunity costs in the spot market, prices for ancillary services may rise at the same time. The same flexibility is therefore continuously reassessed and allocated across competing revenue opportunities.
For the economics of battery storage systems, this development means that commercialization strategies focused on individual revenue markets are becoming less robust. A key success factor is the ability to implement multi-market strategies and continuously allocate capacity and energy to the markets where they generate the greatest value. Longer storage durations can create additional economic value by providing greater flexibility to capitalize on volatile spot market conditions.
*All backtests are based on a Grey Standalone Storage System Case.
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