KfW Estimates the Price Impact of Large-Scale Storage Systems
KfW Sees Large-Scale Storage as a Key Lever for More Stable Electricity Prices
August 20, 2026
Source: E & M powernews
It is now possible to quantify the extent to which large-scale storage systems affect electricity prices. A new analysis illustrates this effect while also identifying obstacles to expansion.
Battery storage is growing rapidly in Germany—but for the power system, it’s not just about the number of systems. Their location and how they charge and discharge are also crucial. This is shown in an analysis published on August 20 by KfW Research. The authors are Hendrik Moritz and KfW economist Johannes Rode.
According to the analysis, as of early June 2026, battery storage systems in Germany had a combined capacity of approximately 19,000 MW and a storage capacity of about 29,000 MWh. This means that installed capacity has increased more than eightfold within five years. However, according to KfW Research, nearly 80 percent of the installed capacity is accounted for by residential storage systems. Grid-connected large-scale batteries have so far made up a significantly smaller portion of the installed base.
According to the authors’ assessment, it is precisely these large-scale storage systems that can play an important role in the electricity market. They preferentially charge electricity during hours when prices are low—such as during peak solar generation at midday—and discharge it during more expensive periods. In doing so, they raise low prices slightly while simultaneously suppressing price spikes in the morning and evening. Since power plants with higher marginal costs often set the price during these times, the price-reducing effect during discharge can be stronger than the price-increasing effect during charging.
Price spread decreases by up to 19 percent
Moritz and Rode analyze European electricity market data for the years 2023 through 2025 and compare installed large-scale battery capacity with the trend in electricity exchange prices. Their analysis shows a significantly stronger smoothing effect for large-scale batteries than for residential and commercial storage systems.
Based on the expansion of storage capacity in Germany between 2023 and 2025, the authors estimate a reduction in the daily price spread of approximately 17 to 19 percent. They explicitly note that this figure is an approximation and not an exact forecast. Residential and commercial storage systems, on the other hand, have had little impact on the price profile so far, as operators use them primarily to optimize self-consumption.
The authors also highlight obstacles to further expansion. In 2024, project developers submitted grid connection requests for large-scale storage facilities with a combined capacity of approximately 400,000 MW. Grid operators approved only about 25,000 MW of this total. Furthermore, the uniform German electricity exchange price does not account for local grid bottlenecks. Consequently, from an economic perspective, a storage system may make sense to charge or discharge at a given time, yet still exacerbate a local bottleneck in the process. The authors view dynamic grid tariffs as a potential approach to providing storage systems with stronger spatial and temporal signals.
The paper explains the mechanism using data from California and the authors’ own European analysis. It also addresses grid connections, alternative storage technologies, and regulatory barriers.
Author: Davina Spohn