To achieve a 10% return solely from arbitrage, a two-hour battery developed in 2024 must achieve an average price spread of €114/MWh over its lifetime. The average minimum-to-maximum price spread achievable for two-hour batteries in the European market from January to August 2024 was €78/MWh.

Since 2022, €22 billion in state aid has been approved by European countries to support energy storage project development.

This year, the price spread has been widening after falling back in 2023 from record levels set in 2022. The widening is partly due to higher solar penetration, which has led to historically low daytime electricity prices in markets like Germany and Spain. The arbitrage-based business model—charging when prices are low and discharging when prices are high—has further benefited from falling battery prices. Two-hour and four-hour storage systems, favored for arbitrage, are becoming more economical.

Frequency response still accounts for most project revenue, but prices could fall due to an upcoming oversupply. This is already happening in the UK, where the commercial case for storage has been evolving.

In addition to the widening price spread, falling battery prices have also improved the viability of arbitrage-based projects. A two-hour battery developed in 2024 now needs to average a daily price spread of €114/MWh (equivalent to $127/MWh) over its lifetime to meet investor goals, down from over €150/MWh in 2023.

Despite this improvement, the price spread alone is still not enough to support projects in most markets. Exceptions include Southern and Eastern European markets like Hungary and Romania, where high gas generation costs lead to particularly high peak prices.

Even in markets with large price fluctuations, developers are slow to build without certainty of revenue, so government support continues to increase. Over the past year, more than €20 billion in new state aid has been announced, bringing the total since 2022 to €22 billion.