Realistic Valuation of Battery Storage: Why Backtests Are Not Enough
The white paper “The Structural Value of BESS” is a joint publication by the Forschungsstelle für Energiewirtschaft (FfE) and Re-Twin Energy. It combines Re-Twin Energy’s optimization models for battery storage with FfE’s long-term electricity price forecasts. The objective is to assess the revenue potential of battery energy storage systems not only under current market conditions, but within the context of long-term energy system developments.
Short-Term Revenues Are Not a Reliable Benchmark
Battery storage (BESS) valuations are often based on historical backtests. These reflect actual market conditions, but primarily capture short-term volatility and exceptional events. This leads to revenue expectations that systematically exceed what can be achieved over the long term.
Structural Value Emerges From the Energy System
The joint white paper by FfE and Re-Twin Energy shows that this gap is structural. Backtests capture opportunistic revenues, while long-term electricity price forecasts describe the sustainable revenue potential of battery storage. These forecasts are based on energy system models that represent how electricity markets develop over time. As a result, there is a clear difference between both perspectives. Backtests can indicate revenues of approximately €200,000 to €280,000 per MW per year, while structurally achievable revenues are typically in the range of €120,000 to €180,000 per MW per year.
Implications for Business Cases and Investments
For assessing the economic viability of battery storage and developing robust business cases, the structurally achievable revenue level is decisive. Short-term revenue opportunities can provide additional orientation, but are not sufficient on their own. Structural revenues form the basis for bankable projects and financing decisions. Short-term market opportunities and long-term economic value therefore need to be assessed separately.
This white paper is particularly relevant for:
- Project developers and operators of battery storage systems
- Investors and financial institutions
- Utilities and market participants
- Anyone evaluating the economics and risks of BESS projects
The white paper details how long-term electricity price forecasts and optimization models can be combined, and what this means for the valuation of battery storage.
