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-location-Systems—that is, battery storage combined with renewable energy generation facilities—offer enormous potential in this regard. They make it possible to integrate battery storage in a way that benefits the grid and to preserve the value of PV systems during periods of negative prices. But not all co-location is the same: the various technical concepts, regulatory frameworks, and marketing strategies must be carefully considered.
Figure 1 | Types of battery storage: stand-alone and co-location.
1. Stand-alone battery storage: Maximum flexibility in marketing
A stand-alone battery storage system is connected separately to the power grid, without being directly linked to a PV generation system (see Figure 1). This structure enables two key marketing opportunities: trading “gray electricity” (buying and selling on the spot market—day-ahead and intraday) and/or trading balancing power (positive and negative balancing power).
The decoupled structure of the stand-alone battery storage system allows for maximum flexibility in driving behavior and participation in the electricity market. This enables what is known as cross-market optimization. The strategy involves leveraging flexibility by trading simultaneously on the spot market and the balancing energy market to generate additional revenue.
2. Grey co-location: shared grid connection, separate balancing groups
In a “gray” co-location arrangement, the battery storage system and the PV system share the same grid connection point (GCP) but are managed separately from both a billing and technical standpoint. The PV system can be marketed through EEG direct marketing, a PPA, or other direct marketing channels. The battery storage system, on the other hand, is not marketed through direct marketing but rather on the spot market (day-ahead, intraday) or through cross-market optimization.
A key feature is that, depending on the generation situation, either the PV electricity or the battery storage electricity is fed into the grid as a priority. This allows for targeted management of revenue and the utilization of flexibility in the electricity market. Another advantage of this structure is that the EEG feed-in tariff provides a steady stream of revenue for the PV system, which supports the financing of such projects.
3. Green Co-Location: „Behind-the-Meter“ with Support for Innovation
In a green co-location setup, the battery storage system and the PV system are directly connected „behind the meter.“ There is only one grid connection point, and separate feed-in or feed-out is not possible. The electricity fed into the grid is fully subsidized through the innovation tender.
In this model, marketing is limited to direct marketing under the EEG and innovation funding. Flexibility trading on the spot market is not possible, as there is no option to purchase gray electricity. Particularly during months with low generation, such as in winter, the battery storage system may remain unused, which reduces potential revenue. In addition, the provision of balancing energy is severely limited.
Despite these limitations, green colocation can still be an attractive business model—especially when viewed from the perspective of long-term value creation and market integration. The following simulation illustrates the considerable revenue potential that can be tapped when battery systems are intelligently optimized, even within the structural limitations of the green colocation model.
Deep Dive: Revenue Potential of Green Co-Location
To illustrate the revenue potential, we ran a simulation using the case of “Grüne Co-Location” as an example. The following analysis shows the revenue that such a system could have generated in 2024 through ESFORIN’s flexibility trading on the wholesale markets (day-ahead and intraday).
The simulation is based on a 4-hour battery combined with a PV system with a peak output of 20 MW and 1,000 full-load hours per year. Potential subsidies through the innovation call for proposals were not taken into account in the analysis.
Figure 2 | Additional Revenue from Green Co-location Compared to Stand-Alone PV
The results show that simply integrating a 4-hour battery can more than double the system’s total revenue. Battery storage makes it possible to shift PV generation specifically to valuable market time windows, thereby generating additional revenue. Thanks to this effect, green co-location projects often pay for themselves 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
Depending on the technical implementation and regulatory framework, different marketing strategies are available. While stand-alone battery storage systems offer maximum flexibility for cross-market optimization, “gray” co-location combines fixed returns with flexibility. Green co-location, on the other hand, relies on subsidy mechanisms and prioritizes EEG remuneration, but offers little leeway for utilizing flexibility.
