Unlocking the revenue of hybrid projects

Hybrid energy storage – also referred to as hybridization - involves the integration of different storage technologies to enhance performance, efficiency, and lifespan. As the global transition to renewable energy accelerates, this approach is gaining popularity to help stabilize supply and demand fluctuations.

Hybridization as a means to de-risk projects and unlock revenue streams

In markets with declining solar PV capture rates and network integration challenges for renewable projects, combining battery energy storage systems (BESS) with solar PV and/or wind assets can be an effective strategy for investors, developers and operators to minimize project risks while tapping into new revenue opportunities. This is supported by some of the key market trends DNV is currently observing across Europe:

Pressure on solar PV capture rates. A swift expansion of solar PV in markets like Germany and Spain is leading to lower market-based revenues for solar PV projects. Combining solar PV projects with BESS can help to increase solar PV capture rates by time-shifting solar generation to higher priced hours. In comparison to Germany and Spain, DNV is not foreseeing significant future cannibalization of solar PV capture rates for solar PV projects in Poland.
Increasing network curtailment risks. In some areas in Poland a further build-out of the transmission and distribution network is required to support secure system operation by managing the infeed of solar PV and wind projects. BESS hybridization can support network integration by time-shifting solar PV generation to hours with lower congestion and higher power prices.
Emergence of incentives for co-location of BESS with solar PV and wind projects. Policy makers can support renewable integration by implementing incentives which support the commissioning of BESS at solar PV and wind project sites. Typical incentive schemes can be market premium models which can help investors and developers to improve the predictability of hybrid revenue streams, therefore de-risking investment in hybrid systems.

Market trends underscore need for adequate risk assessment

The above-mentioned trends emphasize the need for an adequate assessment of investment economics and merchant risk of renewable and BESS projects. Hybrid business cases can be site-specific and projected revenues should be assessed at least on an annual basis, given the volatile dynamics of wholesale, intraday and ancillary services markets, and the ongoing reduction of BESS capital costs. BESS degradation should be monitored and potentially addressed through amended BESS augmentation strategies to accommodate BESS capacity market participation requirements and project life considerations driven by the solar PV business case of the hybrid BESS project.

Developers and investors in hybrid BESS projects are typically looking for economic asset valuation of hybrid BESS projects through hourly dispatch of hybrid systems, co-optimized along day-ahead, intraday and ancillary services markets, to address the aforementioned project assessment needs.

Forward projections of ancillary services market saturation, i.e. maximum market participation of BESS in forward ancillary services markets, is important to adequately address increasing competition of BESS projects for ancillary services provision. Specifically for Poland, the capacity market is another important driver for hybrid projects with BESS. The capacity market provides a long-term predictable revenue stream, supporting investment economics and finance conditions of hybrid BESS projects.

We see an emerging interest in tolling contracts for BESS projects in Europe and expect the Polish market to follow that trend. In a hybrid BESS project with solar PV, potential constraints of specific solar PPA terms on the economics of the hybrid business case should be well assessed. Similarly, applicable incentive schemes for hybrid systems can also result in potential constraints on BESS operations, suppressing business case economics. For instance, the Innovation Tender framework in Germany for BESS hybrids with solar PV limits the charging of the BESS to the infeed from solar PV, therefore disregarding ancillary services provision as an important revenue stream for the BESS hybrid.

Typical business challenges of BESS hybrid projects can be:

The BESS capital costs added to a solar PV project might not be offset by increased revenues from solar PV from time-shifting, for instance due to limited capital cost synergies and a reduction of BESS revenues compared to standalone operation of a BESS and a solar PV project. Most hybrid projects tend to focus on improving the solar PV business case, whereas BESS business case losses in hybrids can be high compared to standalone BESS business cases.
Network congestion can be temporary for a specific solar PV location and therefore might not adequately reflect the long-term opportunity costs of solar PV project curtailment. Co-location of a BESS for such a site might not be cost-effective.
Incentive schemes for BESS hybrid projects might be focused on maximizing renewable energy integration and overlook the value contribution of BESS to the power system as a whole, such as the provision of system adequacy and ancillary services.

A view on BESS hybridization in Poland

DNV is considering the emergence of network congestions as one of the key drivers for BESS hybridization in Poland. Solar PV developers might experience a faster grid connection application process for BESS hybrids with solar PV compared to standalone solar PV sites. BESS hybrids in Poland can participate in markets for ancillary services and the Polish capacity market, while supporting network integration of renewable projects. DNV expects that BESS hybridization will continue to be an important solution to support the energy transition in Poland towards a low carbon, secure and cost-effective energy system.

DNV works with all stakeholders in Poland, including investors, developers, generators, network operators, end-use customers and policy makers, to deliver advisory services and technical solutions to support the energy transition.

5/26/2025 6:00:00 AM