Analysis
When storage reshapes the market: a stress test for the PV+BESS investment case
14 min Reading time ·
For investors, what matters is not which single market forecast turns out to be right, but under which conditions a PV+BESS investment continues to create value.
Solar cannibalisation can raise the value of flexibility. But the price patterns that create this value are not static: as storage deployment increases, the underlying power-shifting opportunity can itself change.
The central investment question is therefore not to estimate today's value of storage. What matters is understanding which parts of that value are robust, which may be affected by market adjustment, and whether the project still works if these assumptions change.
Solar and storage complement each other — for now
As solar deployment grows, generation increasingly concentrates in the same hours. Prices in these windows can fall, meaning PV generators capture less value relative to the average wholesale price.
A battery storage system offers an intuitive response: a portion of generation is shifted from lower-value hours into higher-value windows. The first-order logic is simple: more solar → weaker solar capture rates → higher value of flexibility → a stronger case for storage.
For investment decisions, however, the second-order effect matters more. If attractive spreads trigger substantial battery storage build-out, that storage does not merely capture an existing opportunity. It also charges during low-price periods and discharges during higher-price hours. Beyond a certain level of market penetration, flexibility can start to change the very price pattern that made flexibility valuable in the first place.
Growing storage deployment need not eliminate the value of flexibility. But it can change how that value evolves over time and how it is distributed across individual assets.
1. Solar power has captured significantly less market value in recent years
Solar capture has deteriorated markedly over the past few years. In Steerpoint's illustrative German PV reference case, based on a site-specific generation profile for Munich, the PV capture rate developed as follows:
- 2023: 78%
- 2024: 65%
- 2025: 54%
- rolling 12 months to July 2026: 58%
What matters is the direction: the reference asset has recently captured markedly less value relative to the average wholesale price. This is directly relevant for a PV investor. A market can continue to show solid average power prices while a solar plant realises substantially lower prices precisely in the hours when it produces.
Storage can recover part of this lost value through power shifting. The harder investment question, however, is how durable this opportunity remains once storage deployment itself increases.
2. Growing storage deployment can reshape the power-shifting opportunity
Much has already been written about the compression of ancillary services revenues — the so-called ancillary cliff. Ancillary services have been an important value driver for many current BESS investments, and increasing competition for limited reserve markets can change their economics.
This article focuses on a different question: the underlying power-shifting opportunity. Additional storage creates flexible demand when charging and additional supply when discharging. As market penetration increases, charging can lift prices in previously very cheap periods, while discharging adds supply in higher-price hours. Both effects can change the spread available to storage.
- Demand growth
- Thermal capacity
- Fuel prices
- Grid constraints
- Renewable build-out
The direction is not predetermined. Demand can grow. Thermal capacity can be retired. Grid constraints can tighten or ease. Fuel prices can shift. Solar build-out can outpace storage build-out — or vice versa.
PV capture rate and the power-shifting value of battery storage are therefore not mechanically correlated. However, they are partly influenced by the same market drivers. In a long-term investment case, they should therefore not be treated as static, independent assumptions.
3. Australia shows why today's spreads should not simply be extrapolated
The Australian National Electricity Market provides an instructive example. An analysis by Franz Schaefer for WattClarity examined two-hour spreads across the NEM's four mainland regions amid growing battery storage deployment.
On normal days, spreads widened significantly over the course of 2024 and then narrowed overall through 2025 into early 2026. The lower price level of the opportunity also shifted: in several regions, the analysed price trough for charging rose noticeably.
Battery charging is a plausible contributing factor, as storage creates flexible demand during low-price periods. However, this observation should not be interpreted as clear-cut causation. Solar and wind generation, demand, thermal generation, transmission capacity, fuel prices and other market conditions changed simultaneously. The analysis itself explicitly avoids attributing the observed changes to battery storage alone.
The market variables that create the value of storage can change materially as the power system adjusts.
The analysis also highlights a second important distinction. On days with extreme events, large system-wide spreads can persist, even as individual battery storage assets compete more intensely with one another to capture them. The power system can continue to place a high value on flexibility, even as the value realisable at project level becomes more selective.
Future BESS economics may therefore increasingly depend on the characteristics of the individual project — and less on the blanket assumption that "storage is valuable".
4. PV capture and power-shifting value can move in different directions
Solar cannibalisation does not mean there is only one deterministic path for storage economics. Likewise, growing battery storage deployment does not mean power-shifting value must decline continuously. PV capture and power-shifting value respond to partially overlapping but distinct market drivers. Four simple combinations illustrate possible states:
| Illustrative state | PV capture | Power-shifting value | Interpretation |
|---|---|---|---|
| Flexibility scarcity | ↓ | ↑ | The value of solar falls while flexibility remains scarce |
| Market adjustment | ↑ | ↓ | More flexibility smooths the intraday price profile, improves solar capture and reduces power-shifting spreads |
| Flexibility crowding | ↓ | ↓ | Weak PV capture and lower storage value occur together |
| Broader market scarcity | ↑ | ↑ | Other market forces support both PV value and the value of flexibility |
These states are neither forecasts nor probability-weighted scenarios. Their purpose is to show that more than one economically plausible combination exists — and that the investment outcome can differ materially between these states.
5. Market uncertainty translates into the economics of the overall project
For a PV+BESS investment, what matters is not only how large a future market spread will be. What matters is how different market conditions affect the economics of the investment as a whole. Steerpoint uses a simplified historical reference case to isolate one part of the BESS value stack: the Reference Power-Shifting Value.
The historically modelled incremental value per MWh discharged, arising from shifting power from lower-price into higher-price day-ahead windows under a defined battery configuration and operating logic.
This is not an observed high-low market spread. The calculation compares the revenue achieved after shifting with the revenue that would have been achieved if the entire PV volume used for charging had instead been sold at the original time of production. Battery losses are therefore already reflected in the incremental value.
The reference calculation deliberately does not attempt to replicate a professional multi-market battery optimisation. Detailed intraday optimisation and dispatch into ancillary services markets fall outside the model. These value sources can nonetheless be significant. The Screening Calculator therefore allows users to add an Additional BESS Value assumption, for example from ancillary services or more advanced optimisation.
This separation matters in both directions. Ignoring these value sources entirely could understate today's BESS economics. Extrapolating today's optimisation or ancillary revenues unchanged across a long-term investment case could overstate their durability. The goal is not to replace specialised revenue forecasts or optimisation models. The goal is to make visible the assumptions the investment depends on.
From market assumptions to overall investment outcome
Illustrative reference case: 20 MW PV in Germany; 10 MW / 20 MWh BESS; charging exclusively from PV; 90% round-trip efficiency; historical day-ahead prices; rolling 12 months to July 2026.
- Pure merchant PV project: at a PV capture rate of around 58%, an annualised earnings contribution of roughly –€412,000 per year.
- BESS operation: around 5,693 MWh of discharge per year, equivalent to roughly 285 equivalent full cycles.
- Reference Power-Shifting Value: around €105 per MWh discharged, equivalent to roughly €600,000 of incremental power-shifting value per year.
- After around €96,000 of BESS O&M and €351,000 of annualised BESS capital costs, the battery improves the result by roughly €153,000 per year.
- Combined PV+BESS project: annualised earnings contribution of roughly –€259,000 per year.
Under the chosen assumptions, the combined greenfield case remains below economic break-even on this screening metric. This finding needs to be seen in context, however: the reference case deliberately excludes both detailed intraday optimisation and ancillary services revenue — either of which could materially improve BESS economics.
The conclusion also changes when the investment is viewed incrementally. For an existing PV asset, the historical PV capex is already sunk. The relevant question then is not whether the combined PV+BESS project would have been attractive as a greenfield investment, but whether the additional battery creates sufficient incremental value relative to its additional costs. In the selected case, the incremental annualised earnings contribution is positive: the BESS improves annualised economics by roughly €153,000 per year.
The example therefore illustrates an important distinction: the economics of the overall project and the incremental value of an additional investment are not the same question. An attractive power-shifting opportunity does not translate one-to-one into investment value, because that market value first needs to cover the capital and operating costs required to realise it. In the reference case, BESS capex itself is therefore also a key assumption that drives the outcome.
The selected case initially provides only a single point value. The Calculator therefore translates different combinations of PV capture rate and Reference Power-Shifting Value into the annualised earnings contribution of the combined PV+BESS project, while configuration, capex, O&M, Additional BESS Value and all other assumptions are held constant.
Within the sensitivity range shown, both a higher PV capture rate and a higher Reference Power-Shifting Value improve the annualised earnings contribution of the overall project. The selected case remains negative, while the project turns positive under some stronger combinations of the two market conditions.
The matrix should not be interpreted as a forecast or a probability distribution. It offers a robustness perspective on the project — not a complete map of all investment uncertainties. Its purpose is to answer one specific question: how robust is the economics of the same investment when two key market drivers change together?
6. Market value is not the only source of project value
Two projects with the same market outlook can still have very different investment economics. Grid connection is one example. Where connection capacity is scarce or available only after long lead times, a co-located battery storage system can benefit from infrastructure and connection rights already in place for the PV asset. Existing connection infrastructure can avoid duplicate investment, reduce dependence on a separate connection process and accelerate market entry.
The advantage remains project-specific. Co-location does not automatically create additional grid capacity: combined PV and BESS operation remains bound by the permitted import and export limits of the shared grid connection. Timing can therefore itself carry standalone investment value. A battery that can enter the market earlier is not economically equivalent to an otherwise comparable battery whose grid connection is delayed.
- Battery configuration and storage duration
- BESS capex
- Charging flexibility
- Route to market
- Quality of optimisation
- Access to additional revenue pools
- Timing and grid connection
As competition for broad market-value pools intensifies, such asset-specific advantages can become more important. Flexibility can continue to hold high value for the power system as a whole, even as the economic rent realisable at project level becomes increasingly differentiated.
7. Robust investment decisions require more than a single market forecast
Good power price forecasts, revenue forecasts and professional battery optimisation remain essential inputs. The investment decision should not, however, rest solely on selecting the most convincing base case. Forecasts will diverge. Markets will surprise. Technology costs will change. And the cumulative build-out of the assets being valued today can itself help reshape the very markets their economics depend on.
A robust PV+BESS investment case should therefore pass three tests. First: define the investment decision and identify the sources of value — greenfield PV+BESS or an incremental BESS investment into an existing asset — with separate consideration of the contributions from PV capture, day-ahead power shifting, Additional BESS Value, grid connection, timing and other project-specific advantages. Second: identify the assumptions that drive the outcome — on both sides of the economics, from market value drivers to BESS capex, operating costs, grid connection assumptions and timing. Third: test robustness across plausible market states, i.e. check whether the investment remains attractive even when key assumptions change together rather than in isolation.
Under which future market states would we still want to own this asset?
An investment case that only works under a narrow combination of high ancillary value, strong power-shifting economics, favourable capex and good timing is fundamentally different from a case that remains attractive across several plausible market states. The question therefore shifts from "Which forecast do we believe?" to "Which investment remains robust if the forecast is wrong?"
PV+BESS is a particularly visible example of a broader challenge in energy investment. Capital is tied up for many years in markets that continue to adjust. Grid connections develop unevenly. Revenue pools mature. Technology costs change. Investment windows open and close. The same analysis can therefore also help frame the next question for investors: as a value pool becomes more competitive, where might the next economically accessible scarcity emerge?
The goal is to understand the investment well enough to know what drives its value, where it holds a genuine advantage, and whether that advantage persists as the market changes.
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