The article: Why the smart money still backs batteries in Great Britain

Executive Summary 

Battery energy storage projects that are going into commercial operation in 2026, in Great Britain, are expected to achieve lower returns compared to similar projects in Germany and several other European markets. But returns for battery storage in Great Britain remain profitable, despite a decline compared to the peak years of 2021 and 2022, when returns were boosted by pre-saturation frequency response gross margins.

Yet returns alone don’t tell the full story. GB’s utility scale in-front-of-the-meter battery storage market continues to offer deep structural advantages: innovative yet mature market access ecosystem, clear policy intent, evolving ancillary services, a well-defined development and connection pipeline, and a range of financing options. Developers and investors that know how to capture locational upside, cost advantages, and get the timing and duration right, can outperform.

In this article, we explore why GB remains an attractive battery storage market – not just on a spreadsheet, but in substance. For those looking to build, acquire, or finance BESS in GB, the attractiveness of the opportunity is more than skin-deep.

Looking ahead: While this piece focuses on GB, it also serves as a preview of some of the themes and will be central to our Battery Energy Storage Market Scanning Report, available later this month. The report will apply a consistent framework to evaluate and rank major global BESS markets by attractiveness, providing investors and developers with a truly comparative view across geographies.

Are returns for battery storage profitable in GB?

Yes. Battery storage projects in GB are profitable, though returns have moderated compared to recent years. For 2026 commercial operation dates (COD), GB returns are lower than those in Germany and several other European markets in our reference case.  

But profitability isn’t everything. What makes GB attractive is its depth: the maturity of its market structures, the resilience of its policy signals, and the opportunity for well-executed projects to materially outperform average returns.

How can specific projects outperform?

Even though the median IRR is modest, certain GB battery projects can beat the benchmark due to:

• Locational advantages: Some locations offer revenues or cost offsets through contracts for: reactive power, restoration and constraint management, and network losses and charging benefits.
• Capital and operational efficiencies: Large-scale projects - in the hundreds of MW or even gigawatt-scale - benefit from economies of scale and lower Capital Expenditure (CapEx) and Operation & Maintenance (O&M). Developers with preferential Original Equipment Manufacturer (OEM) procurement terms (for battery packs or maintenance) also improve returns.
• Developer capability: Returns are shaped not just by market conditions, but by the developer’s ability to identify sites, negotiate capex, and optimise operations. In GB, developer strategy and execution are key differentiators.
• Go long(er): In GB, the gap in returns between 2-hour and 4-hour BESS is already narrow for 2026 COD projects – and it only widens in favour of longer durations over time. Longer-duration assets are set to outperform. If you’re building, go long(er). If you’re buying 2-hour, or under, assets, plan to augment – space, planning, and permits permitting.

Beyond IRRs: what makes GB attractive?

Even with lower IRRs under our Reference Case, GB’s battery market has several features that make it uniquely investable.

1.  Is ancillary services market saturation already behind us?

GB has already gone through saturation in frequency response and reserve markets – a phase where the total ancillary service volume requirement is overwhelmed by battery build-out. This matters because:

• In GB, future value is increasingly expected from deeper wholesale power markets (day-ahead and intraday markets) as well as the Balancing Mechanism, not just from frequency response such as the dynamic suite of frequency response products, or reserve products such as quick and slow reserve.
• Many other European countries still have this saturation risk ahead of them  – with pricing for Frequency Containment Reserve (FCR), Automatic Frequency Restoration Reserve (aFRR), Manual Frequency Restoration Reserve (mFRR) expected to decline to the opportunity cost of the marginal battery performing energy arbitrage.

The transition that has already occurred in GB, creates stability for battery operators and makes the GB market less vulnerable to overbuild than emerging markets.

At the same time, new national ancillary services products – designed by the system operator to maintain the reliable and secure operation of the power system – continue to emerge in GB, offering short-term upside:

• Balancing Reserve and Quick Reserve are already live – with Quick Reserve enlargement to include more participants from the middle of Q3 2025
• Slow Reserve is now expected to launch in early 2026, having been delayed from October 2025
• Static and Mandatory Frequency Response are being reformed into 2026 and beyond

These transitions provide punctuated upside periods for assets ready to respond to product changes.

2. An innovative yet mature market access ecosystem

Market access in GB is among the most developed globally. Asset owners can choose from tolling, revenue floors, or revenue sharing models, or optimise their own batteries, depending on their risk appetite and investment horizon.

GB's competitive market access landscape keeps transaction costs low and quality high.

Investors can tailor market access models to match their financing strategy and asset profile, even blending market access models across single large assets or at portfolio level.  

Publicly available near real-time and historical data about what batteries and other energy resources are doing via the Balancing Mechanism Reporting Service (BMRS) has enabled asset, portfolio and optimiser benchmarking services. This level of transparency is rare globally and represents a distinct advantage for GB compared with most other markets. Benchmarking makes it straightforward to compare asset and optimiser performance, raising standards across the market by driving higher optimisation quality, intensifying competitive pressure, supporting more informed optimiser selection, and encouraging continuous capability improvement.

GB is also a market where counterparties are comfortable deploying innovative market access solutions, helping battery owners and investors manage merchant risk while retaining flexibility. Examples of new financial solutions include:

• Revenue swaps – A third party (often an insurer or hedge fund) provides the battery owner with a fixed annualised revenue in exchange for variable revenues generated by the asset. The battery continues to participate in optimisation markets (ancillary services, day-ahead, intraday, BM), but instead of bearing volatility, the owner receives a contracted fixed cashflow (effectively a floor). The counterparty then takes on the risk and reward of actual market revenues.
• Day-ahead swaps – A financial hedge where battery owners exchange realised revenues for a more predictable day-ahead revenue profile. The counterparty guarantees the asset a return equivalent to what it would have earned in the day-ahead market, while assuming exposure to the full range of markets.

3. Policy clarity (even amid change)

The GB battery market has experienced its share of policy uncertainty – but it now benefits from several stabilising signals:

• Storage is a core pillar of the UK’s Clean Power 2030 and Net Zero 2050 ambitions.
• Following the UK Government’s decision in July 2025 that the outcome of its Review of Electricity Market Arrangements (REMA) was to reject zonal pricing and retain a single, albeit reformed national GB-wide wholesale market, we expect less disruptive change, that will be set out by the Government in the Reformed National Pricing Delivery Plan later this year.
• The launch of a cap-and-floor mechanism for long-duration electricity storage (LDES) opens a new route for storage projects with duration of 8 hours or more, including batteries, not just pumped storage hydro. Ofgem expects to approve the first projects by Q2 2026 and these projects should be operational between 2030 and 2033. 

Join our upcoming webinar Insights on the UK Cap and Floor for Long Duration Energy Storage, Thursday 18 September 1:00 PM

These reforms bring policy credibility and increase investor confidence, even without every detail being finalised.

4. A strategic plan for connections

Grid access is a critical bottleneck for storage – but GB is taking steps to address this:

• The Strategic Spatial Energy Plan (SSEP) will guide where flexible assets can connect in alignment with long-term system needs; we expect the first iteration of the SSEP to be published in 2026.
• In April 2025, NESO’s connection reform initiative, approved by Ofgem, launched a new process for prioritising viable projects. Developers can now submit evidence to secure queue positions — creating a more transparent, deliverable pipeline.

5. A pipeline built for scale

The July 2025 (quarter 2), Renewable Energy Planning Database (REPD) reports:

95 GW of battery and storage capacity in GB across planning, pre-construction, and construction stages.

The pipeline is a massive pool of potential M&A targets for investors looking to scale quickly or acquire at ready-to-build stage. With connection queue reform now in place, pipeline depth is becoming a competitive asset, not a risk.

6. Diversity of financing

Another feature that sets GB apart is the breadth and depth of financing sources now active in the market. The sector is no longer reliant on a narrow set of early-stage backers but instead attracts a wide spectrum of capital providers:

• Equity from vertically integrated utilities and energy majors, as well as independent power producers (IPPs), continues to provide strategic commitment and long-term balance sheet strength.
• Private equity participation remains strong through specialised infrastructure funds, bringing operational expertise and active portfolio management.
• Institutional capital has been mobilised via publicly listed storage funds, providing scale and liquidity to the sector.
• Pension funds are increasingly entering the market, attracted by stable long-term returns and the sector’s alignment with ESG mandates.
• Public financing, which played a critical role in the early pilot battery projects pre-2015, has returned through the UK Infrastructure Bank and the National Wealth Fund – signalling renewed government alignment.
• Debt financing is now widely available from commercial banks and specialist lenders, further deepening market liquidity and reducing the cost of capital.

This diversity of financing sources provides resilience to the GB market, ensuring that investment momentum is not overly dependent on any single category of investor and helping the sector to weather different stages of the market cycle.

More than just a margin stack

So – are GB battery projects profitable? Yes, though IRRs in 2026 may be modest compared to peers. But profitability is only one piece of the puzzle.

The real opportunity lies in:

• Project-level outperformance
• Structural market maturity
• Policy and reform resilience
• Scalable access and pipeline depth
• Wide spectrum of financing options

Later this month, we will be publishing the Battery Energy Storage Market Scanning Report. This landmark study will apply a uniform framework across all major battery energy storage markets, considering a range of factors – to rank global markets in order of overall attractiveness.

We encourage readers to watch this space – especially those seeking to allocate capital across multiple jurisdictions. The upcoming report will provide a structured, comparative view of the most investable battery markets worldwide, supporting more informed decision-making in a rapidly growing sector.

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