Recently, industry media and the energy storage analyst from the research institution Wood Mackenzie held a conversation, thoroughly comparing the current development status and future trends of the energy storage markets in Europe and the United States.
Although the energy storage summit held in London mainly focused on the development of the European energy storage market, it still attracted industry manufacturers and international experts from all over the world. Allison Weiss, the global head of energy storage at Wood Mackenzie, and Anna Darmani, the chief energy storage analyst responsible for the EMEA market, both attended the conference. For industry media, this was undoubtedly an excellent opportunity to kick off high-level discussions on the energy storage markets in Europe and the United States.
This interview reveals the “complex emotions” of the European market towards the development of energy storage: Energy storage developers are highly enthusiastic about the current revenue levels, while investors are more cautious about the stability of future revenue streams. At the same time, the US market also faces similar short-term instability as the European one, and the root cause lies in regulatory uncertainty, although the underlying driving factors are completely different.
In these two mature markets, Europe and the United States, the two analysts pointed out that there are significant differences in the energy storage policies of the two regions: The European Union is committed to increasing the share of renewable energy (VRE) in the power grid, while the current administration in the United States has a different attitude. However, they emphasized that beneath the surface, both markets have fundamental driving factors that make the rapid deployment of energy storage systems an inevitable choice.
European Market: Mixed Results, Innovative Contract Model
Darmani said, “I have observed that the returns in the European energy storage market are somewhat mixed.” She noted that many investors and banks are closely examining the trend of returns in the European market. The recent decline in returns in the British market has already caused some people to feel uneasy.
In contrast, American market developers believe that the business model is feasible. They can proceed with the project without relying on contract revenues or subsidies.
Darmani said, “We have seen that energy storage system developers are steadily advancing project deployments in the United States. They are indeed able to find sufficient partners for their development projects. At the same time, banks are also questioning: ‘If the returns are not as expected, what options do we have now?'”
As early as at the 2025 Energy Storage Summit, Anna Darmani, the chief energy storage analyst for the EMEA market at Wood Mackenzie, had predicted that charging agreements would become more widespread in Europe. Since then, the total installed capacity obtained through operation contracts or power purchase agreements has indeed seen a significant increase.
Darmani added, “What is equally surprising are the innovations in these contracts. We saw various types of contracts being signed: physical, virtual, guaranteed, capped, almost everything imaginable. Everyone knows that the energy storage system has developed and will persist and function in the long term, but the stakeholders are also trying to hedge against the risks brought about by market changes.”
The US Market: Opportunities and Challenges Amid Policy Changes
Allison Weiss stated that the performance of the US energy storage market over the past year has been quite intriguing. Since the beginning of 2025, a series of policy changes have occurred or been implemented. Although research institutions such as Wood Mackenzie have identified some uncertainties when calculating global energy storage deployment volumes – not only in the US, but also in China, which is a major global exporter of batteries and energy storage equipment, has made significant policy adjustments – this has introduced variables to market predictions.
Weiss said, “Overall, despite the uncertainties, we still predict that the scale of energy storage deployed in the United States this year will exceed that of last year. This is mainly due to the key investment tax credits reserved for energy storage systems. However, the rule changes regarding the eligibility for tax credits for ‘foreign concern entities (FEOC)’ mean that US projects need to make adjustments to their supply chain management. We believe that this will have a certain impact on the project progress in the short term, but in the long run, as the domestic supply in the United States grows or as more cost-competitive energy storage products are imported, the United States will obtain cheaper energy storage systems.”
In terms of revenue, Weiss believes that the United States has largely witnessed the end of purely commercial energy storage projects. To a large extent, Texas is indeed driving the development of the US market, but in some respects, its trajectory is similar to that of the UK: after the auxiliary service market becomes saturated, energy revenues also fluctuate. Due to relatively mild weather, 2024 and 2025 are years with lower volatility in electricity demand for the ERCOT market in Texas. Although the fundamental demand for energy storage in ERCOT in the future remains strong, Wood Mackenzie predicts that there will be high volatility in the coming years, but it may be uneven and difficult to predict. This has made some investors very nervous, and their reactions vary depending on their risk tolerance: to stay in the market to capture future upward trends, to exit and shift to safer areas, or to only participate in projects with long-term contracts.
Mode convergence: Adopting virtual toll fees or revenue exchange strategies
Weiss and Darmani stated that there are similarities in the adoption of fee-based agreements and other contract revenue structures between the European and American markets, but the progress in the United States has been much faster.
Weiss pointed out that although Europe lags behind in this regard, perhaps because the British market has maintained commercial energy storage projects for a longer period than that in Texas, Europe is rapidly embracing tolling agreements.
Weiss said: “In the United States, except for Texas, the general situation in other regions is that all energy storage projects will have capacity contracts, which provides a certain degree of stability. In Texas, these could be long-term purchase contracts with load service providers, or they could be transactions in the forward market.”
Darmani believes that Europe is following the same trend as the United States. Three years ago, when writing the battery storage contract report for Wood Mackenzie, Weiss explained the concept of virtual charging that covers the price difference. Nowadays, this virtual charging structure is becoming increasingly common in Europe, but it is usually referred to as “income swap”. Weiss said, “I wrote in that report that income swap might become the dominant type in the European market because it might work in the United States and it might also work in Europe. Now we see that income swap is one of the most popular methods.”
Structural differences: Node pricing and market puzzle
Although the patterns are similar, there are fundamental differences in market structure. Darmani pointed out that the United States is not a unified electricity market but rather a complex aggregation of states, transmission zones, and wholesale markets. While the European Union consists of 27 member states, its degree of grid synchronization, interconnection, and shared electricity market is much broader than that of the United States.
Another significant difference lies in the node pricing model used in the United States. This model enables developers and investors to more clearly determine in which specific locations on the public power grid it would be more beneficial to install energy storage systems. When discussing the layout strategies of American developers, Weiss stated: “The connection of energy storage projects to nodes and power hubs is the key to evaluating their economic benefits.”
Nevertheless, Weiss believes that the fundamental driving factors remain the same regardless of the market: The increasing integration of renewable energy power generation facilities has led to fluctuations in electricity prices, and energy storage systems benefit from these fluctuations. During this process, the market opportunities for battery storage often start with auxiliary services such as frequency regulation, which has led to saturation in markets like the PJM service area in the United States, as well as in Germany and the United Kingdom, which are characterized by auxiliary services as a precursor.
Weiss concluded: “In the United States, energy storage system operators need to consider the difference between node prices and hub prices, as well as the associated risk of price fluctuations. In Europe, the main concern is how grid costs change over time.”