Europe’s battery energy storage system (BESS) market has matured, with deployments reaching 11 GW in 2024. Installations are expected to grow 45% year-over-year (YoY) to 16 GW by the end of 2025, according to new analysis from Wood Mackenzie.

By 2034, Europe is expected to see 35 GW of BESS deployments.

The market for BESS is likely to grow at a 9% compound annual growth rate over 10 years.

Germany leads BESS deployment in Europe, with over 3.5 GW forecasted in 2025 and projected to double to 7 GW by 2034.

However, the German market could see revenue decline over the coming decade despite strong current fundamentals. According to the analysis, increasing competition cannibalizes the price volatility that storage assets depend on.

German connection requests for BESS have risen from around 300 GW at the beginning of the year to 500 GW. The report highlights that the growing number of connection requests for BESS points to major grid connection challenges in the coming years.

The utility-scale BESS segment accounts for 35% of Germany’s storage outlook, totalling 18 GW of BESS demand over the next 10 years. An additional 8 GW comes from the commercial and industrial sector.

Wood Mackenzie said Germany is expected to see a power-supply vacuum as it phases out nuclear generation, and that another 29 GW of coal capacity is likely to be offline by 2030.

At the turn of the decade, early-stage UK project developers sought investment opportunities in Australia and the California Independent System Operator and Electric Reliability Council of Texas markets due to a lack of opportunities in the region.

The sudden shift away from traditional power sources creates challenges for national grid energy shifting, ancillary services, and security-of-supply requirements that residential BESS cannot adequately address at the GWh scale.

While BESS appears lucrative under current market conditions, the BESS market is expected to see pressure on revenue streams in the future.

Wood Mackenzie added that frequency market revenues, highly sought after in Germany, represent shallow revenue pools typically well below 1% of system peak demand in GW terms.

Revenues from the frequency market are saturated as BESS deployments approach and overtake this market’s need.

With economies of scale, ancillary service revenues become a smaller share of the revenue stack, increasing competition in these markets. When more BESS projects compete for margins during peak and trough periods, prices flatten and ultimately erode price fluctuations.

Wood Mackenzie said that even day-ahead and intraday prices could face pressure from these large revenue pools.

A recent report by Ember said that the capital cost for long-duration (4 hours or more) utility-scale BESS in markets outside China and the U.S. reached roughly $125/kWh by October 2025.

According to a report by SolarPower Europe, the BESS market on the continent grew by 15% in 2024.