For a long time, the easiest way for a battery to earn money in Europe was to help the grid stay at 50 Hz. Frequency response and other ancillary services were lucrative and under-contested. That era is ending. In every European market where batteries have scaled - Great Britain, Germany, France, the Nordics - ancillary-service prices have collapsed. Batteries entering service in 2026 cannot rely on them in the way 2020–2022 projects did. The revenue stack is shifting visibly, and the design choices it forces on new projects are big.
What the numbers show
McKinsey’s 2025 analysis of European BESS revenue tracks a clear pattern: ancillary services are on a trajectory from 50–80% of the revenue stack today to below 40% by 2030, with wholesale arbitrage rising from 20–50% today to becoming the dominant line, and capacity markets moving from near-zero to 20–30%. In Great Britain, average battery revenues fell from around $300/kW/yr in 2022 to roughly $182/kW/yr in 2023 as ancillary prices corrected - the top quartile held up through wholesale arbitrage, but the fleet average collapsed. In France, the primary-reserve (FCR) market saturates at roughly 1 GW of battery participation, past which the clearing price drops to 40–50% of its 2021–2022 level. Similar dynamics in Germany, Belgium and the Nordics.
Why saturation happens fast
Ancillary services are small markets relative to wholesale energy. Primary frequency response across the European synchronous area is on the order of 3–4 GW of contracted capacity. Secondary reserve is larger but still bounded by system need. A market where 1 GW of batteries participate is already at 25–30% saturation for FCR; at 2 GW it is past it. The economic floor on ancillary price is set by the next-cheapest provider - typically a flexible generator or demand-response aggregator - and batteries are structurally cheaper than both once capex is sunk. Prices collapse toward the variable cost of a battery, which is essentially zero plus degradation cost.
What is emerging in its place
Three new revenue layers are emerging to backfill.
Wholesale arbitrage on shorter timescales. EU single day-ahead and intraday markets moved to 15-minute resolution on 30 September 2025. The finer time resolution creates more spread opportunities per day, and a fast, well-optimised battery captures a larger share of them than a slow-responding resource. This is the main reason wholesale is expected to rise from 20–50% to the dominant line by 2030.
Capacity markets and long-duration storage contracts. Italy’s MACSE, Greece’s storage CfD, the forthcoming Iberian capacity auction, and GB’s long-duration storage cap-and-floor are all attempts to pay batteries for being present rather than only for dispatch. The contract lengths (15 years) and the revenue certainty (regulated or competitively set) materially change project IRRs. McKinsey flags these as the fastest-growing share of future European BESS revenue.
System services for grid-forming inverters. Germany’s Bundesnetzagentur is launching a paid inertia market in January 2026 at an indicative €8–17k/MW/year for grid-forming-capable resources. Similar mechanisms are in consultation in the Nordics, GB, and Spain. The service is new, the price point is material, and only grid-forming inverter designs qualify - which tilts procurement toward units with the right firmware architecture specifically.
What it means for a new project
Three practical consequences. First, a 2026 pro-forma that assumes 2022-level ancillary-service revenue is wrong. The honest modelling assumption is that ancillary revenue is a residual, not a base case. Second, wholesale arbitrage increasingly sets the revenue floor, and that floor depends on forecasting accuracy, execution latency and dispatch discipline - all of which favour operators with strong optimisation stacks. Third, the capacity-market line is the closest thing left to a contracted annuity, and the cost of missing that line (either through poor auction strategy or failure to meet de-rating thresholds) is material to IRR.
The saturating-ancillary-services problem is not unique to Europe - California went through the same cycle in 2020–2023 - but Europe is going through it faster because the installed base is scaling rapidly from a small starting point. The good news is that the transition to wholesale + capacity is not a crisis for well-sited, long-duration batteries; it is a headwind for 1-hour, ancillary-only designs built to the 2020–2022 playbook. The new playbook, for 2026–2030, is 2–4 hour duration, capacity-market participation, and wholesale optimisation as the dominant skill.