From idea to grid: How BESS works and gets financed

The global transition to renewable energies is key to reducing CO₂ emissions, but these renewable energies do not always provide electricity when it is needed.

LEADERS LEAGUE: Why are energy storage systems so important?

Wolfram Huber: Energy demand is growing and needs to be met in a climate-friendly way. However, renewable sources such as wind and sun do not always provide electricity when it is needed. Storage solutions such as BESS are designed to compensate for these fluctuations by storing energy when more is produced than consumed and releasing it again as needed. In this way, they ensure a stable supply and are therefore essential for a successful energy transition.

What exactly are BESS and how do they work?

BESS are systems that store electricity in batteries and release it again when needed. They are mostly used where renewable energy is generated, for example in wind or solar power plants. If a photovoltaic system produces more electricity during the day than is consumed, the BESS stores the surplus energy and makes it available again later, for example in the evening. Technically, most systems rely on lithium-ion batteries, which have proven themselves to be durable, safe, readily available, and economically attractive.

What is important when implementing BESS projects?

Successful BESS projects begin with a structured market analysis and a solid site selection: proximity to power grids, available space, and local grid requirements are crucial. In addition, the regulatory framework must be carefully examined, as this determines which market models and subsidies can be used. The selection of battery systems and their integration into the grid are just as important as clear planning of the project duration, operating costs, and economic efficiency. Last but not least, financing plays a central role: without a viable financing structure, no project can be successful in the long term.

How can BESS projects be financed – what are the challenges?

Battery energy storage systems (BESS) are usually financed through a combination of equity and debt capital. Project financing is often chosen, whereby loans are repaid exclusively from the project's cash flows. A major challenge is the uncertainty of revenues, as BESS do not produce electricity like conventional power plants, but primarily earn money through time shifting and grid services. This makes revenue forecasting complex and leads to banks demanding higher equity ratios - often 30 percent or even more. The key point is simple: the steadier the income, the more a bank will be prepared to lend.

Innovative financing models are also becoming more important, such as blended financing, in which public funds serve as a risk buffer for private investors; outcome-based financing, which links payments to the actual performance of the storage facility; and new business models such as Battery-as-a-Service (BaaS), in which users rent battery storage instead of buying it, thus avoiding high investment costs.

Is the BESS breakthrough already happening – and what will make it mainstream?

BESS are already moving from pilot projects to everyday use in many markets. To reach full scale, we need a robust legal and contractual framework and fair access to the grid. If we get these basics right, battery storage will become a standard part of our energy system.