Developers of German battery storage projects are increasingly pursuing asset sales and co-investment partnerships ahead of a key regulatory deadline, driving heightened transaction activity across the country’s BESS sector.

Infralogic data shows more than 20 battery-related transactions in Germany have been announced so far this year, with those in the sector expecting further deal flow as developers seek capital to advance projects into construction.

Infrastructure investors including Allianz Global Investors, British Columbia Investment Management Corporation and Macquarie Asset Management have already invested in the growing German battery market.

One factor underpinning the market’s current momentum is the requirement for battery projects to be commissioned before August 2029 to benefit from Germany’s current grid-fee exemption regime, said Christof Aha, partner at ADVANT Beiten.

Under Section 118 of the German Energy Act (EnWG), the country currently grants battery energy storage system (BESS) projects commissioned by 4 August 2029 a 20-year exemption from transmission grid fees.

To secure this, projects must reach a Final Investment Decision (FID) before the regulations take effect in 2027. The FID is a new, additional requirement to get the grid fee exemption introduced by the Bundesnetzagentur on 27 May, Aha explained.

Post-2029, a new capacity-based fee is planned, which is likely to prove more expensive for developers.

According to Aha, recent announcements by the Bundesnetzagentur suggest projects would require to have reached FID before details of the country’s future grid-fee framework, known as AGNES, are finalised.

AGNES is not expected to be resolved before January 2027, explained Aha. Currently a formal consultation process for the draft framework is due to open this summer.

As things stand, FID means that almost 50% of total investment costs have been committed through binding hardware orders and that grid access has been awarded by the relevant network operator, Aha added.

Investors more selective, prices fall

While the upcoming regulatory changes are helping to drive activity, advisers say investor appetite is increasingly focused on project quality rather than simply scale.

Baris Serifsoy, partner at GreenCap Partners, said the evolving grid-fee framework is contributing to market momentum, but is only one of several factors influencing transactions.

“There is stronger differentiation between projects based on expected connection dates and conditions as well as construction cost subsidy [Baukostenzuschuss] levels. On aggregate there is probably a decline in prices,” Serifsoy said.

As investors scrutinise development pipelines more closely, projects with advanced grid connection status and clearer routes to commissioning are increasingly commanding attention.

Early stage projects, as shown by Kajoni Energie portfolio sale of 750 MW / 3 GWh to Green Flexibility, where GreenCap was exclusive sellside adviser, shows investor interest is high across various maturity stages of the BESS sector, said Serifsoy.

But investors are becoming increasingly selective and disciplined in their approach. While there is a clear preference for more advanced projects, developers can still achieve successful exits at earlier stages, he explained.

“Essentially, the whole market remains active,” said Serifsoy. “Whilst some realism has set in and investors are scrutinising grid connection conditions far more closely than they were a year ago, there remains healthy demand for battery storage projects, even at relatively early stages.”

Long-term fundamentals remain supportive

Despite concerns that increasing deployment could put pressure on operating margins over time, the market for BESS remains positive.

“Continued growth in non-baseload energy sources means that BESS will continue to grow in relevance even if operating margins may compress over time,” Serifsoy said. “But new opportunities for BESS in the form of data centres could continue to add to the appeal of this sub-asset class.”

Serifsoy noted BESS assets can support data centres if they are combined with solar PV and wind projects nearby thereby creating a supplementary energy source which is close to “baseload”.

For developers, the current regulatory framework continues to encourage rapid project progression.

Aha noted that commissioning assets before key regulatory deadlines can materially improve project economics and internal rates of return.

As investors become more selective and regulatory changes begin to reshape project economics, Germany’s battery storage market is entering a more mature phase.

While valuations are increasingly linked to grid access and project deliverability, advisers expect continued strong demand for advanced-stage assets as developers seek to secure favourable economics ahead of the 2029 deadline.