4-hour battery systems deliver 13.7% IRR in Germany, outperforming 2-hour configurations.

What market forces are driving that shift?

Renewable generation grows 150% to 695 TWh by 2040, deepening the midday price trough. Demand grows 70% to over 1,000 TWh. They widen the daily spread that longer battery durations capture, supporting 40 GW of BESS capacity - 13× what's on the grid today.

Ancillary services account for 55% of BESS revenues in 2026 but fall to 5% by 2030 as supply outgrows procurement and wholesale arbitrage becomes the dominant revenue stream. For a 2-hour system, revenues start at €235k/MW/year and stabilise at €115k/MW/year by 2030.

This article covers the fundamentals, revenue mechanics, and investment case for German BESS through 2050.

Fundamentals

Solar grew from 7% to 16% of German generation in a decade

Germany's generation mix shifted from fossil baseload to intermittent renewables over the past decade. Solar's share of total generation grew from 7% in 2015 to 9% in 2020 and 16% in 2025. That growth created the midday price trough that batteries now exploit.

Solar production peaks at midday and falls to near zero in the evening. Gas peakers ramp to meet demand. Batteries capture this spread, shifting energy from midday surplus to evening scarcity.

Renewables grow 150%, demand grows 70% by 2040

Renewable generation in Germany grows from 280 TWh in 2026 to 695 TWh in 2040, or an increase of 150%. Demand grows from 605 TWh to 1,035 TWh (a 70% increase) as electrification of transport, heating, and industry drives consumption.

Gas drives spreads near-term; solar and BESS take over by 2030

Daily spreads track gas prices in the near term. Gas falls from 2026 highs as global liquified natural gas (LNG) supply grows and European gas demand structurally declines. As gas prices flatten, solar penetration takes over as the primary spread driver in the early 2030s.

In the longer term, BESS cannibalisation depresses spreads. But batteries continue to operate above required investor returns as CAPEX declines.

The German top-bottom spread for a two-hour battery (TB2), starts at €85k/MW/year in 2026, declines to €70k/MW/year in 2030, and recovers to €80k/MW/year in 2035.

The duck curve is most pronounced in 2026, with evening peaks set by stronger gas prices. Through 2040, the curve flattens as gas prices normalise and battery arbitrage smooths intraday swings.