​The solar-plus-storage hybrid pipeline is seeing massive growth through both greenfield projects and retrofits. The investment case is supported by industrial demand and data centre growth.

The challenge is valuation. How do you move from a first merchant assessment to a bankable project, optimising two technologies with different operating profiles? Developers must weigh several variables to extract the most value from the merchant case: siting, solar-to-battery ratio, battery duration and coupling. Then, price contracted revenues to close the gap between merchant value and requirements for financing.

This piece uses Modo Energy's July 2026 nodal forecast to follow that process, from the initial merchant case through to the contract structure the market is increasingly choosing.

Executive summary

• A reference hybrid (100 MW / 4-hour BESS + 120 MWp solar) entering in 2029 earns a 3.9%–6.7% merchant unlevered IRR across representative NEM renewable energy zones.
• ​Contracting closes the gap to bankability, and hybrid PPAs are the preferred structure. All ten publicly announced NEM hybrid offtakes use a hybrid PPA. This reflects the demand from large energy consumers such as industrials and data centres.
• Maximising the battery-to-solar ratio and battery duration is key to extracting the most merchant value out of your project. Solar provides the renewable volume, while the battery brings the market value.
• Coupling matters less commercially. AC, DC and reverse-DC configurations change merchant IRR by <0.5 percentage points. Site suitability and development risk are more likely to dictate the coupling type.

​Appetite for contracting renewable generation closes the merchant investment gap

A hybrid contract can bridge the gap between merchant returns and bankability. There are two main approaches. Developers can:

• Contract solar and BESS separately, with solar under a traditional $/MWh PPA and BESS under a toll or swap agreement. Or,
• Combine them in a hybrid PPA, evaluated on the total site in $/MWh.

A toll gives the counterparty the battery's dispatch rights in exchange for a fixed payment. This suits infrastructure-style owners seeking predictable cash flows, but gives up the battery's merchant upside.

A swap floors battery revenue while retaining a defined share of upside above the floor. This suits developers and energy-focused owners who want to retain some merchant exposure.

The most common structure among publicly announced hybrid contracts as of August 2026 is the hybrid PPA. It assigns a $/MWh value to the combined dispatch of solar and BESS, based on the expected optimised operation of the hybrid.