SECTOR FOCUS: Battery Energy Storage Solutions – Commercial & Industrial

The Battery Energy Storage Solutions (BESS) market is composed of 3 main segments: Residential, Comercial & Industrial (C&I) and Utility-scale. Over the 2024-2028 period, C&I is expected to be the fastest growing one in Europe, with a cumulative capacity multiplied by 4.4x to 12x[1]. A conservative analysis led us to the conclusion that the market should grow at a 71% CAGR in volume:

European C&I BESS projected capacity and installation[2]

The associated market in value should grow at a 45% CAGR over the same period[3], to reach €4.1Bn in 2028. On one hand, the average hardware price per MWh will probably decrease in a movement of commoditization[4].  On the other hand, C&I operations are becoming more complex as buildings, warehouses and industries increasingly integrate energy-consuming assets such as EV charging stations and heat pumps, along with energy-producing assets like solar panels and grid connections. Thus, the software proportion of the C&I BESS market should take up, to represent more than €200m in Europe in 2028⁵.

This fast pace is driven by:

• Electrification: to reach decarbonization goals and sustainability commitments, transport, industry, heat, and other processes are increasingly electrified, leading to a surge in demand for power (e.g. electric vehicles expected to represent 40 to 50% of global vehicle sales by 2030[5]).
• Cost trends: Energy prices have fluctuated heavily in recent years due to supply/demand disruptions, increases in intermittency, and grid costs/taxes. In the case of public infrastructure, commercial buildings, and factories, BESS can reduce energy costs by up to 80% by managing peak shaving, optimizing self-consumption, and integrating renewable energy sources.
• Risk of power shortage and grid congestion: power inadequacy is a priority of the European Commission Clean energy for all European package, namely due to the renewable energy rise in the energy production mix[6]. As an illustration 10 GWh of renewable energy were wasted in Germany due to curtailment in 2023, while grid management cost consumers €3bn.
• Increased installed base of C&I Solar: Solar rooftop systems are expected to grow significantly over the coming years, with solar rooftop additions going from 37 GW in 2023 to 52 GW in 2027, and solar plants annual deployment more than doubling from 19 GW in 2023 to 41 GW in 2027. Currently, there are no viable alternatives to BESS for C&I players in countries with grids that are not adapted to such rapid expansion.

Italy, Germany, UK, Austria, Czech Republic, Belgium, Poland and the Netherlands are the European markets with the biggest potential for BESS C&I due to i) grid congestion issues, ii) energy price volatility and iii) regulatory support. They already represent the majority of the installed European BESS capacity (including Residential and Grid-scale) and are expected to keep that leading position until 2028, even if the aggregate proportion of the numerous other countries will increase⁵.

The two main blocks of the value chain are the manufacturing and the system integration:

Breakdown of the BESS Value Chain[7]

Given the complexity of the C&I segment (see above), system integration concentrates a significant portion of the added value. The integrators must i) design a turnkey solution ii) mitigate the supply and installation risks iii) ensure the lifetime of the installation, through an internalized or outsourced maintenance network. The importance of these challenges allures:

• Pure players, with a single yet medium-sized leader (Aggreko, 7.8k people[8]), and a lot of SMEs like Volta Energy, iwell or Bredenoord.
• OEMs, whether large ones such as Huawei or Alfen, or medium-size players like Tesvolt.
• Large energy providers such as ENGIE.

In conclusion, there are interesting SMEs to watch in the field of BESS C&I in various European countries. The system integration segment is particularly attractive because it is i) added value oriented ii) still fragmented iii) interesting for large players.

[1]Source: Solar Power EU 2024

[2]Sources: GIGF, Solar Power EU 2024, European Commission

[3] Source: GIGF, Solar Power EU 2024, European Commission

[4] Source: Solar Power EU 2024

[5] Source: Forbes August 2024

[6] Source: European Commission

[7] Source: McKinsey. NB: EMS means Energy Management System (software)

[8] Source: Pitchbook, September 2024