Battery revenues across Europe are projected to fall by around 20% by 2040 as a result of market saturation, according to new analysis.
However, co-located storage could help to mitigate these risks by shifting generation, reducing curtailment and improving capture prices, said Aurora Energy Research in its ‘European Co-location Markets Attractiveness Report’, released on May 11.
The global power markets analytics firm identified Germany, Great Britain (GB) and Bulgaria as Europe’s most attractive co-location investment markets in the report, which covers 20 regions.
Aurora also highlighted Spain, Hungary, and France as key markets to watch, citing recent ongoing regulatory changes and reforms.
Europe’s co-located renewable capacity reached 6.3GW in 2025, led by solar-plus-storage (over 60% of deployments), according to the report.
Aurora said while maturity varied widely, a significant pipeline is expected online within five years. Spain, GB and Germany lead in total capacity, while Bulgaria and Romania stand out relative to size, with co-located solar exceeding 40% of installed PV.
Grid access and policy design are key drivers, with more than 1,600GW of renewable and storage capacity awaiting grid connection across Europe, including around 550GW in GB alone.
In markets such as the Netherlands, Greece and Hungary, co-location can improve grid access or reduce costs, the report said. High grid charges in the Netherlands and regions such as the integrated single electricity market (I-SEM) arrangement for Ireland and Northern Ireland, further strengthen the case for pairing storage with renewables.
Meanwhile, the report said subsidies remain the dominant route to market, although hybrid power purchase agreements are gaining traction.
Two‑sided contracts for difference — agreements between buyers and sellers to exchange the difference in the price of an underlying asset between the time the contract is opened and closed — open to co-location continue to play a central role, with markets including I‑SEM, GB, France, Romania and Estonia offering attractive subsidy scheme designs.
Additional dedicated, ring‑fenced support is available in Bulgaria, Greece and Germany, alongside growing CAPEX support for co‑located batteries.
Sameer Hussain, research senior analyst at Aurora, said co-location was no longer a niche solution, rather it was increasingly critical to protecting project economics and sustaining investment momentum.
Jörn Richstein, Aurora’s research lead for pan-European power markets, policies and technologies, said: “Co-location is not a one-size-fits-all investment across Europe. In some markets it is driven by merchant upside, in others by subsidy-supported stability, and elsewhere by the need to overcome grid constraints and limit curtailment.”
Last March, Batteries International reported that the European Commission was proposing a fresh package of support to encourage private investments in long duration energy storage projects and “novel” renewables.The Commission said it planned to work with the European Investment Bank Group to step up financial support for investments in LDES and a range of clean energy tech such as floating wind, floating solar and wave and tidal power
