Tom Harries investigates Spain and Italy as emerging BESS markets.
The IEA expects global installed energy storage capacity to expand to over 200 GW by 2030.1 – equating to a 23% compound annual growth rate.2 This rapid level of growth is more comparable to that of big tech in the 2010s than traditional classes of energy infrastructure assets.3
In the EU, energy storage deployment needs to grow to around 14 GW every year to meet the expected power capacity requirements of 2030.4 Southern Europe will be a key growth region with a combined 23 GW projected to be built in Italy and Spain before the end of the decade.5 Based on current market rates, this represents an estimated potential TIV of 9 billion euros and potential available premium pot of 45 million euros.
To incentivize the rapid deployment of battery storage both Spain and Italy are enacting supportive subsidy and regulatory frameworks. Ambitious state targets include 20 GW in energy storage deployment in Spain by 2030 under the PERTE ERHA.6 Across both Italy and Spain, this will include at least 1.8 GW in new installed capacity by 2025.7
Italy is the fastest-growing BESS market in Europe outside of Great Britain (GB). This reflects its adoption of two key policies: 15-year capacity agreements and 5-year fast reserve contracts to encourage frequency response services.8 Last year’s fast reserve tender awarded 250 MW of energy storage capacity.9
Spain is also developing a specific regulatory framework to support its emerging BESS market. Before 2020, energy storage had no legal definition in Spain.10 Without a legal definition, developers were unable to benefit from any financial or regulatory support. The Spanish government has continued to back energy storage and, in 2022, awarded €150 million in grants for energy storage co-located with renewable generation sites for up to 65% of their investment costs.11
The EU’s Project PICASSO provides a long-term, pan-European dimension to the revenue opportunity for energy storage. PICASSO is set to synchronise secondary reserve or automatic frequency restoration reserve (aFRR) markets across the connected European grid.12 This greatly expands the revenue opportunity for BESS in Spain and Italy to a pan-European one. PICASSO means that battery facilities in these countries could generate revenue from providing flexibility services to other EU markets.
Long-term market drivers
Beyond global market forces like the falling cost of batteries, the battery storage markets in Spain and Italy are driven by two local market drivers: high renewables resource and accelerating renewables penetration in their electricity grids.
High and consistent levels of natural resource, especially solar irradiation, drive the opportunity for renewable energy in southern Europe. Countries like Spain and Italy have some of the highest levels of solar irradiation for developed countries in the world, with Italy posting global horizontal irradiation between 2.92-4.93 kWh/m2 and Spain between 3.26-5.45 kWh/m2.13 This is about double the UK’s GHI rate (2.10-3.07 kWh/m2).14 It is also a seasonally consistent resource.
The World Bank classifies Spain and Italy as three of Europe’s highest-potential markets for solar PV on this basis.15 This is driving a massive increase in renewables buildout in these countries. Spain’s INCEP 2021-2023 national climate plan requires 60 GW in renewable generating capacity to be built by 2030.16 The share of renewable electricity generation in the Spanish electricity mix increased by a third to 44% from 2010 to 2020.17
In Italy, Fluence projects that 84% of battery storage by GWh built by 2030 will be in the south of the country, especially on the island of Sicily.18 This reflects the concentration of renewable resource in the South.
New markets mean new terrain and new challenges such as the effect of annual temperature swings on BESS performance and safety, wildfire risks in warmer climates, or combining a global equipment supply chain with an immature local supply chain for installation and maintenance. We are guiding our BESS clients as they expand development portfolios across the globe.
- Strategic Project for the Recovery and Economic Transformation of Renewable Energies, Renewable Hydrogen and Storage; https://www.energy-storage.news/spanish-state-providing-e150-million-in-grants-for-co-located-energy-storage-projects/
- https://www.energy-storage.news/italy-enel-starts-building-1-6gw-of-battery-storage-for-2024-cod-as-market-hits-inflection-point/; https://www.energy-storage.news/solar-plus-storage-project-with-200mwh-battery-system-proposed-in-spain/ ; https://www.energy-storage.news/solar-plus-storage-project-with-200mwh-battery-system-proposed-in-spain/