INTERVIEW: Eco Stor head says tolling agreements will accelerate the German battery market

The German battery storage market has been attracting increasing levels of investor capital over recent quarters, and one of the biggest deals to occur in the space to date took place in February with Brookfield-backed X-Elio and Nature Infrastructure Capital’s joint acquisition of Munich-headquartered Eco Stor.

Unlike many BESS developers active in Germany, Eco Stor already has a substantial portfolio of advanced stage projects, with four of these, totalling 800 MW / 1.7 GWh, either now under construction, at ready-to-build, or soon set to reach this stage.

In addition, while many investors are still agonizing over whether to make a move into the German BESS space, largely due to concerns over what the BESS revenue stack is going to look like over the coming years, Eco Stor for one believes that greater revenue certainty is within reach.

“I strongly believe that tolling agreements will be an accelerator for the growth of the battery market in Germany,” says Georg Gallmetzer, managing director and co-founder of Eco Stor.

While acknowledging that such contracts are not yet mature, his company is interested in helping tollers to improve their value proposition in order to make a substantial contribution to battery growth. In particular, Eco Stor has proposed a model which it sees as the best fit to entice in the lending market, and is working hard to implement and standardise it to become a commodity.

“That’s not yet the case, but we are early movers on this and very happy to collaborate on it,” he says.

Gallmetzer notes however that the value stack requires a mix of tolled or partially tolled assets, as well as assets exposed to market risk.

“We are not shy to take market risk,” he says of Eco Stor. “But we know that the capital market also needs de-risked assets.”

Currently, he says the German battery storage market’s revenue stack is dominated by an assumption of revenue from wholesale trading with participation from ancillary services, such as frequency containment (FCR) and automatic frequency restoration reserve (aFRR).

But “we don't do bets on FCR, first, and we don't do bets on aFRR,” says Gallmetzer, adding that they are “too weak” to sustain the country’s growing battery pipeline.

“Our portfolio alone would be large enough to derail FCR and help to cannibalise it,” he cautions.

Eco Stor’s development pipeline

Eco Stor has a pipeline of more than 2 GW that it expects to bring online through 2028.

“Our pipeline is much larger than that [extending to about 7 GW] but the depth of the pipeline and the likelihood of success also needs to be considered, proceeding through all the stages, and then de-risking,” says Gallmetzer.

The portion of the pipeline in the later stages of delivery stands at around 800 MW / 1.7 GWh.

Already under construction is Eco Stor’s Bollingstedt, also known as Eco Power 1. The 103.5 MW / 238 MWh project is being developed on a plot of approximately 1.2 hectares of land in Gammelund industrial park, and is expected to be operational in March 2025.

Further projects that are at or approaching ready to build include Schuby (Eco Power 2), a 103.5 MW / 238 MWh project, and the 300 MW / 600 MWh Förderstedt (Eco Power 3) project.

Construction on both Schuby and Förderstedt is expected to begin before the end of the year, and they are set to become operational by the end of 2025 and in 2026, respectively.

Construction of the 300 MW / 600 MWh Wengerohr (Eco Power 4) will begin by the end of this year at earliest.

Gallmetzer declined to comment on whether Eco Stor has to date raised any project finance for its most developed projects, adding only that the company is capable of starting the build-out on an all-equity basis.

Germany’s overall pipeline

Based on published figures, Eco Stor’s developments account for a significant portion of the German battery pipeline.

Gallmetzer says according to information from the country’s transmission system operators, battery storage projects totalling around 17 GW have requested grid connection points to date.

Eco Stor has requested around 6 GW of connections, which would equate to around 35% of German battery developments.

Meanwhile, Germany’s market master data register (Marktstammdatenregister) would suggest this figure is much higher at 70% of Germany’s battery pipeline. “But I don’t think that is a realistic number,” Gallmetzer acknowledges.

“The problem is that we are pretty much the only ones to publish projects in planning and under construction. You are not obliged to register your projects with the Marktstammdatenregister until they are operational,” says Gallmetzer.

“The grid agency says at the moment, well there is not a lot of assets coming online, why should we bother about batteries,” says Gallmetzer. But there is a “huge wave” of developments that are not being considered, he adds.

“I keep telling everyone at any instance, if we want improvement of the regulatory framework we need to inform the main impactor of the regulation – this being the BNetZa, the grid agency.”

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