How solar-plus-storage can answer Europe’s renewable energy questions

However, this rapidly shifting dynamic in European solar brings a new generation of challenges for project developers. Sarah Montgomery, CEO at supply chain analyst Infyos, said at last month’s Renewables Procurement & Revenue summit, hosted in London by PV Tech publisher Solar Media, that solar PV developers looking to add storage to their projects, and BESS installers keen to play in the solar space, face a wide range of technical challenges.

These technical challenges mean that developers, investors and project operators need to decide as to whether the additional moving parts required to operate a solar-plus-storage project are worth the additional investment and operational challenges. But with Europe’s renewable energy landscape undergoing a period of financial and political uncertainty, the flexibility of co-located projects, pertaining to both grids and financing mechanisms, could be a kind of complexity well worth understanding.

Technical and operational challenges for developers

“The obvious thing is technical complexity [which is] exceptionally different,” Montgomery says to PV Tech Premium, speaking after her appearance at the finance event. “When you’re looking at battery technology you’re talking about a chemical process to charge and discharge a battery, which then means you need to understand characteristics such as degradation, state of health, state of charge, thermal runaway [and] fire safety implications.”

Not only does a solar PV project lack many of these technical complexities, Montgomery notes that the solar supply chains—as complex and increasingly fraught with concerns about energy security as they are—simply have fewer moving parts than their battery counterparts.

“If you compare that to the PV side, you’re mostly looking at securing the quartz polysilicon supply chain,” says Montgomery. “From a technical complexity perspective, there’s a lot more that you need to manage when it comes to building BESS; procuring, constructing, operationalising and optimising a battery is a lot more complex.”

The combination solar-plus-storage also creates uncertainties regarding regulations; Montgomery names the EU battery regulation as an example of a mechanism to “manage some of the risks” associated with solar-plus-storage projects, but one that, nonetheless, provides another set of parameters for potential developers to grapple with.

“You need to make sure that the project that you’re getting supplied with is compliant with the financing requirements you face [and] going to be compliant with new regulations that are focused on managing some of these risks—like the EU battery regulation,” she says.

“I think many battery developers wrongly think that if they work with a tier one BESS supplier, they’ll have no operational problems [as] they’ll do what’s in their contracts and the warranty will cover them. The reality that we’re seeing from live projects on the ground is that that isn’t the case.”

Market challenges for solar-plus-storage left unsolved

Montgomery is not the only one to point to a lack of clarity in the German market; Sameer Hussain, research associate for pan-European power markets at Aurora Energy Research, tells PV Tech Premium that the proposed transition from “innovation auctions” to “resilience auctions” has posed more questions than answers for potential solar-plus-storage developers in the country.

“In the latest draft [the German government] specified that the innovation auctions would be replaced by something called ’resilience auctions’,” he explains. “It isn’t explicitly mentioned what’s going to happen to co-located projects, as a result of switching from these innovation auctions where co-located projects could participate, to these so-called resilience auctions; it’s a bit of a wait and see there as well.”

Hussain spoke on a panel discussion last month at the launch of Aurora’s latest report into the crucial role of strong government policy and favourable market economics in creating the conditions for solar-plus-storage. Montgomery says that a lack of clarity is compounded by the fact that, across Europe, there is no “significantly mature” market for the industry, so there is little precedent for how best to create the conditions to enable widespread solar-plus-storage deployment.

“There’s a lot more complexity in trading battery than in trading a solar PV project,” she says. “As a result, the energy market regulation is a lot more complex and there’s no significantly mature market for BESS; the UK is the most mature in Europe and Germany is second behind that, but Germany’s a great example [of a market] that is very quickly maturing and is a very complex structure of a market.”

Solar-plus-storage as a solution

However, both Montgomery and Hussain note that this uncertainty is hardly a fatal blow to the co-location sector; Montgomery agrees with an assessment that in many cases, the riskier move is now to not invest in co-location, due to the growth of external risks like cannibalisation.

“The solar cannibalisation will have driven a lot of investors, who expected a certain IRR and haven’t achieved that IRR, to say: ‘why haven’t we achieved it, when comparable projects have achieved it?’,” Montgomery explains. “A lot of those projects are co-located with BESS, and factoring into those strategies is one thing.”

Cannibalisation, in particular, has proven a challenge for some of Europe’s more mature renewable energy markets, such as Germany. Figures from Pexapark show that, in April 2026, Germany experienced a year-on-year decline in capture factors from 0.4 to 0.26 as the number of negative price hours increased by 65%. There is a similar trend in France, which endured a 75% year-on-year drop in capture factor, as standalone solar becomes an increasingly uncertain investment opportunity.

Those involved on the storage side of the equation are also keen to shift to co-location. Afrida Kabir, investment associate at Encavis, was one of the speakers at this week’s Energy Storage Summit at the Battery Show Europe in Stuttgart, Germany, hosted by PV Tech publisher Solar Media and co-located with The Battery Show. On a panel discussion about the benefits of co-location, she identified the approach as a key solution to falling capture prices that have affected the standalone BESS sector.

“We’ve been observing the capture price decreasing for the last, I would say, five years; of course, to fight against this lower capture price, the first thought was ‘what would be the easiest option?’ [and] it’s co-location in this case,” she explained. “And also, in terms of our clientele and the overall flexibility becoming a topic of interest has been driving our interest in co-location.”

Hussain adds that an old argument made against co-locating solar and storage—that bringing two disparate technologies together in a single project introduces too much operational and technical risk to make a project worth investing—is also less compelling these days, as risks like curtailment are now thought of as the primary obstacle that must be overcome.

“As we’re thinking about it as a bigger picture, this is not something that we’re hearing about as a larger trend, that co-located projects are being avoided due to too many moving parts, or too much of a layer of complexity,” he says. “If the business case is strong, that’s something that developers would want to do, especially when looking ten or 20 years ahead when you’re reducing the risks of curtailment, negative prices and grid charges.”

Co-location to facilitate financial flexibility

Perhaps the strongest signal that, despite the challenges, the future looks bright for co-location is the increasing maturity of the BESS sector and the revenue that the technology can generate. Montgomery says that BESS has been “evolving into a much more mature market”, and is now accounting for a greater percentage of solar-plus-storage projects than ever before.

“If you go to 2020, 70-90% of revenue on co-located projects was still coming from the solar side, and then 10% was [from] intraday trading and arbitrage,” she explains. “Whereas now if you look at some projects, you’re seeing 30-60% of revenue coming from the storage and flexibility side, and that’s … because you’re moving from ‘let’s have this battery on the side’ to ‘let’s integrate this, let’s run this as a virtual power plant [and] let’s do firm delivery or very specific shaped power.’”

This is perhaps the manner in which co-located projects have the most upside: not in providing flexibility for grids and meeting energy demand, but facilitating some of the more complex trading and financial arrangements that are an increasingly integral part of the dealmaking landscape. Another speaker at the Energy Storage Summit, Maximilian Schädlich, director of business development at Entrix, said that both solar and storage developers have found financial benefits from co-location.

“PV developers came to batteries for a better business case, and standalone BESS developers came because of missing grid connections, so we meet in the middle,” he explained. “One way that we see currently in our client base is to start with a normal PPA on the PV side so you fix some part of the revenue, then you start with the first few years with a merchant agreement for the battery, then, step-by-step you evaluate the project.”

Hussain adds that hybrid generation projects and hybrid power purchase agreements (PPAs) go hand-in-hand.

“I think a route to market to watch out for is definitely the hybrid PPA market,” says Hussain. It’s definitely more niche at this point, you could say, but 2025 was a breakthrough year of sorts, in terms of how much capacity we saw.”