Implementing the energy transition successfully and economically requires not only the expansion of renewable energies, but also the use of battery storage systems and an intelligent optimization strategy. Co-locationbattery storage systems—i.e. battery storage systems in combination with renewable generation systems—offer enormous potential. They enable the grid-friendly integration of storage systems and protect the value of PV systems during periods of negative electricity prices. However, not all co-locations are the same: different technical concepts, regulatory conditions, and optimization strategies must be considered carefully.
Figure 1 | Types of battery storage: stand-alone and co-location.
1. Stand-alone battery storage: maximum flexibility in optimisation
A stand-alone battery storage system is connected independently to the electricity grid, without direct coupling to a PV generation system (see figure 1). This setup enables two central optimization options: Grey electricity optimisation Buying/selling on the spot market (day-ahead and intraday) and/or balancing energy. Providing bidirectional ancillary services.
The decoupled setup of the stand-alone battery system enables maximum flexibility in terms of operation and electricity market participation. This allows for cross-market optimisation. The strategy here is to exploit flexibility through parallel trading on the spot and ancillary services markets, thereby generating additional revenue.
2. Grey co-location: shared grid connection, separate balancing groups
In grey co-location, the battery storage system and the PV system share the same grid connection point (NAP), but are controlled separately for accounting and technical purposes. The PV system can be optimised via EEG direct marketing, a PPA, or other direct optimisation channels. The battery storage system, in contrast, is optimised via the spot market (day-ahead, intraday) or through cross-market optimisation.
A key feature is that, depending on generation levels, either PV electricity or battery electricity is prioritized for grid feed-in. This allows targeted revenue control and optimised use of flexibility in the electricity market. Another advantage is that EEG remuneration provides fixed income streams for the PV system, supporting project financing.
3. Green co-location: "behind-the-meter" with innovation tender
In green co-location, the battery storage system and PV system are directly coupled “behind the meter.” There is only one grid connection point, and separate feed-in or feed-out is not possible. Electricity fed into the grid is fully subsidized via the innovation tender.
In this model, optimization is limited to EEG direct marketing and the innovation tender. Flexibility optimization on the spot market is not possible, as grey electricity procurement is not allowed. The battery storage system may remain unused during low-yield months such as winter, reducing potential revenue. Additionally, the provision of ancillary services is significantly restricted.
Nevertheless, despite these limitations, green co-location can still offer an attractive business case—especially when viewed through the lens of long-term value creation and market integration. The following simulation highlights the considerable revenue potential that can be unlocked when battery systems are optimized intelligently, even under the structural boundaries of the green co-location model.
Deep Dive: Revenue potential of the green co-location
To illustrate the revenue potential, we simulated the case of green co-location. The following analysis shows what revenues such a system could have generated in 2024 under flexibility optimisation by ESFORIN on the wholesale markets (day-ahead and intraday).
The simulation is based on a 4-hour battery in combination with a PV system with a peak output of 20 MW and 1,000 full-load hours per year. Potential subsidies from the innovation tender were not included in the analysis.
Figure 2 | Additional revenue from green co-location compared to stand-alone PV
The results show: integrating a 4-hour battery alone can more than double the total revenue of the system. Battery storage systems enable the shifting of PV generation into high-value market windows, generating additional income. Thanks to this effect, green co-location projects often achieve payback within just a few years.
Given the increasing number of hours with negative prices on the German electricity market, stand-alone PV systems face mounting economic pressure. Combining them with a storage system is an effective way to meet these challenges.
SUMMARY
Different optimisation strategies are available depending on the technical setup and regulatory conditions. While stand-alone battery storage systems offer maximum flexibility for cross-market optimisation, grey co-location combines fixed revenues with flexibility. Green co-location, by contrast, relies on subsidy mechanisms and prioritizes EEG remuneration, but offers limited opportunities for exploiting flexibility.
