Inertia could provide a strong boost to BESS project returns in Germany, but operators are still waiting for the first prequalified inverters.
That’s according to Philipp Hesel, senior associate at Aurora Energy Research, discussing the new service that Germany’s TSOs started procuring at the start of 2026 in light of the gradual phase-out of thermal power plants.
Battery energy storage systems (BESS) with grid-forming inverter capabilities are able to provide the new non-frequency ancillary services, called Momentanreserve, which TSOs will use to keep system operating frequency within a 0.2Hz deviation from 50Hz. Contract lengths can be 2-10 years.
However, the market is still waiting for the first inverters to be prequalified for inertia provision, so no asset is yet providing the service via the Momentanreserve scheme, Hesel said. “All market players are now waiting impatiently for the first prequalified inverters.”
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“The introduction of inertia services demonstrates that BESS can contribute essential grid-support functions,” says Marie-Sophie Braun, head of markets & regulatory affairs for TotalEnergies-owned developer Kyon.
Hesel be speaking at the Energy Storage Summit Germany 2026, in two week’s time, on 15-16 September in Berlin, as will Marie-Sophie Braun, head of markets & regulatory affairs for TotalEnergies-owned developer Kyon.
Braun was bullish on the potential of BESS in the new service: “The introduction of inertia services demonstrates that BESS can contribute essential grid-support functions.”
Boost to IRR
Hesel estimates that the new revenue stream could boost the internal rate of returns (IRR) for large-scale BESS in Germany by 1-2 percentage points (pp) depending on the project’s setup.
“What makes it particularly interesting is that BESS can provide inertia in parallel to other revenue streams, therefore without opportunity costs on other markets. Secondly, the market design: it is a premium scheme, meaning that the TSOs published a price and everyone who wants to provide inertia at this price can do this,” he said.
“This means that asset operators can now lock in a 10 year contract with the TSOs for their inertia provision. This is the first bankable long-term revenue stream in Germany without merchant exposure.”
Kyon’s Braun agreed that operators should be able to ‘stack’ inertia revenues on top of existing applications.
“Depending on the technical design and commercial optimization strategy, participation can often be achieved with limited impact on other revenue opportunities,” she says. “Looking ahead, the successful development of the inertia market will depend on the close alignment of technical asset capabilities, grid requirements and commercial optimisation strategies.”
Are the IRR boost estimates too ambitious?
In a post on LinkedIn a few weeks ago, Ahmed Elbaz, head of BESS execution for home solar and storage solutions firm Enpal, meanwhile gave a more conservative estimate of the boost to IRRs, of around 0.9pp. This was based on a market coupon of about €10,000/MW.
He said rumours of revenues reaching €25,000/MW was ‘a theoretical ceiling that will require massive modifications on the revenue stack and of course a higher fault current for the PCS to support normal activity’.
Grid-forming capabilities for grid access
The question for those deploying BESS in Germany today then is whether they equip their BESS with grid-forming capabilities.
In his post, Elbaz said that, rather than think about whether the potential boost in IRR is worth the extra (small) investment and procurement, operators should see it as about getting access to the grid.
He explained that grid-forming capabilities are already required for BESS projects connecting at the extra-high voltage level (220kV and 380kV), since 1 June 2026. It may soon be at the 110kV level too, though isn’t yet, while at medium voltage there is nothing to oblige it.
Even once BESS is enrolled in such services and regularly winning contracts, it’s not always a given that its share of that service will continue to grow or even be maintained. In March this year, the UK’s National Energy System Operator (NESO) awarded no contracts to battery storage projects in the Stability Market Round 2, surprising many in the market. This was due to modifications to the eligibility criteria, though there was debate at the time around whether this was done intentionally to favour thermal plants or whether it was a reasonably conservative approach to what is a critical system service.
Braun also gave a broader Q&A to Energy-Storage.news recently in which, among other things, she argued that flexible connection agreements (FCAs) for BESS in Germany should come with a reduction in the BKZ fee. Hesel also discussed the German market at-large in comments we included in a broader write-up.
