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^{BATTERY ENERGY STORAGE SYSTEM}
Beyond the battery: making BESS returns last

^{BATTERY ENERGY STORAGE SYSTEM}

Beyond the battery: making BESS returns last

How asset owners can protect profitability through revenue optimization, digitalization, and AI

In 2025, the world added 108 GW of battery storage, a 40% increase from the previous year, bringing global installed capacity to 11 times its 2021 level.¹

The system needs these batteries as wind and solar continue to grow, electricity demand rises, driven in particular by electrification and surging data center consumption, and grids become increasingly congested.

But growing demand for battery storage does not guarantee strong returns for every project. The first utility-scale batteries entered markets with limited competition and strong demand for fast-response services, creating attractive opportunities through ancillary-service revenues. That period is ending. System operators buy only the reserve capacity they need, and as battery capacity exceeds that demand, prices fall toward cost.

Texas shows how quickly these economics can change. Enverus estimates that average battery revenues in ERCOT fell from $149/kW in 2023 to a projected $17/kW in 2025, while the share coming from ancillary services dropped from 84% to 48%.² A mild summer contributed to the decline in 2025, but the underlying competitive pressure remains: the battery fleet will continue to grow even as weather-driven demand fluctuates.³

Europe is seeing a similar shift. In the U.K., ancillary services accounted for 87% of battery revenues between 2020 and 2022, but now make up roughly one-third.⁴ Further, as the market became more saturated, Dynamic Containment Low prices fell 86% in just nine months after June 2022. Now competition is set to intensify: more than 90 GW of battery capacity holds queue positions in Great Britain, compared with a 2035 target of 29 GW⁶, prompting the government to identify storage oversupply as an emerging risk.⁷

This underscores the financial risk of BESS. The asset can perform as intended and serve the grid, yet still fail to deliver the expected returns.

108 GW

global battery capacity additions 2025

63 GW

new battery capacity
China 2025

19 GW

new battery capacity
U.S. 2025

Where the money goes next

Revenue is shifting toward wholesale trading, capacity mechanisms, congestion management, and contracted grid support.

Wholesale trading offers a larger revenue opportunity, but capturing it is more complex. Returns depend on price spreads shaped by weather, renewable output, and network conditions, and a disproportionate share can come from just a handful of days.

For example, S&P Global found that two-hour batteries in ERCOT and Australia earned nearly half their annual revenue during the top 10% of days.⁵ If a battery is unavailable, lacks sufficient charge or is poorly positioned on those critical days, a significant share of its annual revenue can be lost.

Lower hardware costs have helped offset some of the pressure on returns. S&P estimates that BESS capital expenditures fell by around 30% between 2022 and 2024, with payback periods for systems of up to four hours often remaining below ten years.⁶ But lower CapEx cannot fully compensate for a poorly located asset, an unfavorable contract or ineffective dispatch.

Two similar batteries in the same market can now generate vastly different returns. In ERCOT in January 2026, the top quartile of optimizers captured at least 76% of the available spread, compared with just 27% for the bottom quartile.⁷ While these batteries operated on the same grid, in the same month, during the same weather, their return differed based on how effectively the opportunity was captured.

This evolution is changing what it takes for operators to succeed. The physical asset still defines the opportunity, but how it is operated increasingly determines its earning potential. That puts the digital and operational layer at the center of the next phase of BESS economics.

¹ https://www.iea.org/reports/global-energy-review-2026/technology-battery-storage
² https://www.enverus.com/newsroom/ercot-battery-profits-drop-as-market-saturation-reshapes-texas-storage/
³ https://modoenergy.com/research/why-were-ercot-battery-revenues-so-low-in-2025-weather-energy-arbitrage-builodout
⁴ https://modoenergy.com/research/en/how-does-battery-energy-storage-make-money
⁵ https://www.spglobal.com/energy/en/news-research/blog/energy-transition/110625-declining-costs-shifting-revenues-evolving-business-case-for-battery-storage
⁶ https://www.spglobal.com/energy/en/news-research/blog/energy-transition/110625-declining-costs-shifting-revenues-evolving-business-case-for-battery-storage
⁷ https://modoenergy.com/research/en/ercot-march-2026-bess-benchmark-batteries-fern-revenues

BESS returns begin with capital-project fundamentals. But as markets become more competitive, how effectively the asset operates increasingly determines what it can earn.

Battery specifications: What a battery can do	Battery operations: What a battery can earn
Power Duration Efficiency Degradation constraints	When the battery charges/discharges What markets it participates in How revenues are stacked How reliably capacity is available How commercial opportunities are balanced against battery health

Figure 1: IEA: Global battery storage additions: 2021-2025

Source: IEA⁸

⁸ IEA (2026), Global battery storage capacity additions, 2020-2025, IEA, Paris https://www.iea.org/data-and-statistics/charts/global-battery-storage-capacity-additions-2020-2025, License: CC BY 4.0

Five questions to ask before every BESS investment decision

Our analysis reveals a five-point stress test every project should pass, backed by real numbers.

If ancillary revenue falls by half, does the project still work?
If the optimizer runs 10–15% below the top quartile, what happens to equity returns?
If the asset misses the ten best revenue days of the year, what is left?
If cycling doubles, who pays for the degradation?
If the asset must refinance in a weaker merchant market, will lenders still lend?

A project that fails this test may still add useful capacity to the grid, but it will not pay its investors.

Capgemini's BESS economic model runs three futures, all defined by real market conditions and asset operations: two to four hours of duration, one to two cycles a day, and falling CapEx.

Favorable case	Base case	Stressed case
Renewables keep spreads wide and demand for ancillary services holds, so a merchant stack works	Spreads and ancillary prices both compress and merchant revenue alone becomes marginal	Batteries far outnumber reserve requirements, spreads narrow and undifferentiated merchant operators lose money

The race for returns is heating up for BESS operators

For BESS operators, the race for megawatts is still on, but there is a new dimension: the need for returns. The same battery can be sold three ways:

A fully merchant asset keeps all the upside and downside. Cash flows swing and debt is hard to raise. This suits owners with strong balance sheets and a portfolio that can absorb a bad year.
A full toll hands dispatch and market risk to an offtaker for a fixed payment. The owner gets bankable income and gives up the upside. The cycling limits and availability terms must fit the battery's warranty and physics. If they do not, the toll turns into a stream of penalties.
A hybrid model contracts part of the capacity, often 40–50%, and trades the rest. The contracted share sets a floor and the merchant share keeps some upside. In our scenarios this is the only structure that stays viable in all three futures, as long as it is run with discipline.

The market is moving this way. Modo Energy tracked 82 BESS financing deals in Europe in 2025, up from 25 the year before. Disclosed debt rose from €1.4 billion to €6.1 billion, while standalone tolls went from three to 15.⁹ Lenders are adapting with mini-perm loans, cash sweeps and broader warranty packages. Owners should expect to negotiate these as standard terms.

One important difference between battery storage and renewables remains. With solar, for example, lenders finance a relatively predictable generation profile. With batteries, they are increasingly financing a trading strategy, with revenues that depend on market conditions and operating decisions. That makes BESS inherently harder to finance.

⁹ https://modoenergy.com/research/en/march-2026-europe-battery-financing-deal-report-2025

Operations now sits in the revenue model

A contract only protects the revenue that the battery actually earns. A wind farm converts the wind it gets. However, a battery must decide, thousands of times a year, when to charge, when to discharge, which market to bid and how much capacity to hold back. Each decision must respect state of charge, grid limits, temperature, degradation, and warranty.

The advantage lies in how precisely each understands what the asset can do, and how effectively that intelligence translates into commercial decisions through functions like energy management system (EMS) optimization, asset intelligence, and AI-enabled trading platforms. Actual results flow back into forecasts and asset models. When the optimizer assumes a state of charge the battery does not have, the bid fails and the imbalance bill arrives.

Figure 2: Closed-loop optimization across markets and assets

From market signal to performance feedback

Knowing the asset pays.

Operations and maintenance (O&M) has become a revenue function. A battery can report high annual availability and still be down on the three days that make its year. Poor thermal management speeds degradation. Maintenance planned without a view of the market can take the asset out during a price spike. Under a toll or a floor, shortfalls trigger penalties. Every maintenance window, augmentation plan, and extra cycle should be priced against the revenue it puts at risk.

Based on our experience working with BESS operators, that deeper understanding can enable operators to safely access 1–5% more capacity from the same physical system. Across a large fleet, that is capacity without CapEx.

Recent research using real-world data from a large-scale BESS reinforces the value of that precision.
In the study, data-driven component modeling reduced unfulfilled energy delivery by 78.2% and balancing-energy costs caused by deviations by 71.7%. Together, this limited balancing-energy costs to just 1.8% of trading revenue.¹⁰

But knowing how much capacity is available is only the first step. Owners also need to determine where and when that capacity can create the greatest value. Greater visibility into battery condition can inform how an asset should be deployed while balancing immediate revenue against degradation, availability, and asset life. An asset suited to frequent ancillary-service dispatch, for example, may warrant a different strategy from one better positioned for energy arbitrage or longer-duration dispatch.

That flexibility will become increasingly important because there is no single successor to ancillary services. Future BESS returns are likely to come from a shifting mix of energy arbitrage, capacity markets, renewable firming, grid services and behind-the-meter applications. New opportunities are emerging as well. Data centers, for example, represent a growing market as operators seek to supplement constrained grid connections, integrate on-site generation, and manage rapidly increasing power requirements.

Owners therefore need assets and digital architectures capable of following value as it moves. Open, scalable EMS platforms that can connect to new markets, services and technologies can preserve that optionality, whereas a closed model ties the asset to the markets of the year it was commissioned.

¹⁰ https://www.sciencedirect.com/science/article/pii/S0306261925020707?utm_source=chatgpt.com

Digitalization and AI as the new source of competitive advantage

Behind every AI model is data. And for BESS operators, this can be a challenge as data is often spread across original equipment manufacturer (OEM), battery management system (BMS), supervisory control and data acquisition (SCADA), EMS and trading systems, with inconsistent timestamps, definitions and formats. That fragmentation makes it difficult to pinpoint why an asset underperforms, whether the issue lies with the battery, market conditions or the optimizer.

Asset owners should therefore establish clear data rights before signing contracts with OEMs and optimizers. They can outsource O&M or trading to specialists, but should retain control of the asset data model that underpins performance and optimization.

Once the data holds, the next step is moving from prediction to continuous optimization. An AI layer integrated with the EMS can interpret changing market conditions, from intraday price movements to emerging grid events, and adjust dispatch decisions as actual conditions diverge from forecasts. Rather than relying on operators to identify every change and determine the appropriate response, AI can help determine when to charge, discharge or preserve capacity within predefined operational and commercial constraints.

For example, Finnish investment manager Exilion had been operating a 6 MW / 6.6 MWh BESS for five years when, in 2023, it introduced an automated multi-market optimization tool. After this deployment, the asset subsequently generated €40,700/MW/month, a 132% revenue increase compared with its previous trading strategy; the solution also helped reduce the cycle count of their battery by 63%.¹¹

Importantly, intelligence generated through these solutions hold value long after a dispatch decision is made. As owners accumulate operating data across different suppliers, chemistries, configurations, and conditions, AI can identify patterns in reliability, degradation, and performance. Those insights can feed back into maintenance strategies, procurement and even the design of future assets. This creates a learning loop where operating an asset generates intelligence that can improve both current performance and future investment decisions.

¹¹ https://capaloai.com/case-studies/exilion/?utm_source=chatgpt.com

From individual asset to portfolio economics

At portfolio scale, the challenge becomes more complex: which battery should pursue which opportunity, and when?

Answering that question requires a common data model across OEMs, consistent performance metrics and an operating model that connects commercial and asset decisions. Traders need visibility into available capacity and the degradation cost of using it, while asset managers need to understand what that capacity is worth in the market. Without that shared view, each team optimizes for its own objectives at the expense of overall margin. Clear decision rights are equally important: who sets commercial priorities, who adjusts dispatch limits and when operators can override the EMS.

Cybersecurity belongs in the same plan. A BESS links substations, operational technology, cloud analytics, market platforms, and third parties. Securing those connections protects revenue as well as the grid itself.

Finally, operating data should also shape procurement. Reliability and degradation patterns across suppliers and chemistries are evidence for the next purchase. European industrial policy may change which BESS and BMS suppliers qualify for support, and owners who buy for the whole portfolio will adjust faster.

Six disciplines for durable returns in BESS

Design for optionality. Site, duration, connection rights, controls and market qualification should open several revenue paths over 10 to 15 years.
Structure for resilience. Test merchant, hybrid and toll structures against the downside scenario, financing needs and the value of the flexibility being transferred.
Manage availability and degradation as financial variables. The value of uptime depends on when the asset is available. The value of dispatch depends on the revenue it captures relative to the degradation and opportunity cost it creates.
Build the data and operating model before commissioning. Data rights, integration, EMS choice and decision rights belong in the investment case.
Optimize the portfolio, not just the asset. The objective should be to optimize economics across the portfolio, beyond individual sites, balancing immediate revenue with availability, degradation and lifetime asset value.
Bring asset management and trading closer together. For BESS, physical performance and commercial opportunity are inseparable. Connecting these functions allows owners to optimize for margin rather than managing technical and commercial performance separately.

Conclusion

Battery storage will keep growing. Returns will not necessarily follow the same trajectory.

These disciplines depend on one another. A strong optimizer cannot overcome a weak grid connection, and a bankable toll cannot compensate for terms the battery cannot meet. As BESS markets mature, durable returns will depend on getting the whole investment case right: asset design, commercial structure and operations working together from the start.

Authors

Florent Andrillon

Executive Vice President, Energy Transition & Sustainable growth advisor & Global Head of Climate Tech, Capgemini

Remi Dachicourt

Director, Renewables & Decarbonized Power Generation, Capgemini

Shashi Kant Singh

Senior Manager- Renewables, BESS & Hydrogen, Capgemini

Patrick Neary

Manager, Energy &
Utilities, Capgemini