Battery duration determines upfront investment, revenue and risk exposure. Extra hours add value, but revenue gains flatten more quickly than costs fall, forcing a trade-off between initial CAPEX needs and capturing spreads from wholesale arbitrage.
Four-hour systems deliver the strongest near-term returns, reaching an IRR of 12.2% for start dates in 2026. This is 1.5% higher than the IRR of a two-hour system.
By 2029, falling CAPEX lifts the economics of even longer durations. Six-hour systems reach an IRR of 15.5%, with four-hour systems close behind at 15.4%.
The market is already shifting to longer durations. While 83% of Germany’s operational fleet remains under two hours, developers have already registered over 3 GW of longer-duration projects with the regulator.
The question for investors is not whether duration will increase, but how quickly and how far.
To learn more, reach out to the author - cosima@modoenergy.com
Germany is already shifting to durations above 2 hours
Germany’s storage fleet is still dominated by durations up to 2 hours.
The operational fleet totals 2.3 GW / 3.1 GWh, with 45% of all assets between one and two hours.
Average duration has increased from 1 hour in 2022 to 1.7 hours today.
Since 2024, developers have registered over 3 GW of projects above two hours, including 1.4 GW of new four-hour assets from a single developer, Leag.
50% of the near-term pipeline remains below four hours. These projects require less capital per MW, carry lower development risk and align better with today’s revenue mix, still dominated by ancillary services.
Shorter systems also preserve the option to extend duration later, once regulation stabilises and merchant business models have a longer track record.
Market fundamentals push new builds from four hours to six in the 2030s
Duration is expected to shift further upward in the 2030s as the revenue mix moves from ancillary services to energy arbitrage.
