Germany added 13 GW of solar capacity last year, bringing the total to 104 GW. As more solar connects, assets are cannibalising their own value, and capture rates are falling below 50%.
Standalone BESS sits at the opposite extreme. Returns are strong, often above 14% IRR, but more than 500 GW of battery projects are waiting in the grid queue. High-return assets, but limited ability to connect.
Co-locating solar and storage has become the obvious solution: protecting solar value while bypassing grid-access delays to get storage online sooner.
Developers are now testing different route-to-market setups to balance returns against access.
The quickest route to market is usually a green configuration, placing a battery behind an existing solar connection and allowing it to discharge onto the grid, but not charge from the grid. This avoids the queue, but ~6% IRRs are difficult to justify without additional support.
Grey setups and subsidised Innovation Tender projects perform far better, often reaching 13% IRR. But even they sit below unconstrained standalone returns, raising a simple question: why co-locate at all?
Because projects without grid access do not get built, and standalone solar delivers an IRR of just 4%.
A recent poll shows over 80% of developers are planning to add storage to upcoming solar projects.
This piece explores the optimal configuration of co-located solar projects in Germany, and what the co-location boom could mean for the next phase of the storage buildout.
Three grid access models are responsible for the wide spread in returns
Merchant with grid charging (grey): the battery charges and discharges through the grid connection, earning the full merchant stack.
Merchant without grid charging (green): discharge-only. The battery sits behind the solar meter and avoids the grid queue, but captures only limited merchant value.
Innovation Tender (subsidised green): discharge-only, but supported. A premium is paid on every exported kilowatt-hour, compensating for the lack of grid charging and stabilising returns.
The sections that follow break down how each configuration works, what it earns, and what this means for sizing and bankability.
Merchant “grey”: almost standalone returns
Grey co-located batteries are the least restricted and have the highest returns of 12-14%, almost identical to standalone batteries.
The main limitation is the shared grid connection. When the solar plant and battery are optimised independently - for example, in retrofit projects with separate owners - both assets may want to export at the same time, resulting in lower battery revenues.
But when the two assets are optimised together, the battery delivers most of the project’s upside. Curtailing the solar plant often increases overall project value by preserving battery flexibility. In this hybrid setup, the priority is to maximise the battery’s ability to shift solar from low- to high-price hours.
