A recent analysis by KfW Research provides, for the first time, reliable figures for an effect that we at Extensio have been convinced of since our founding: large-scale battery storage systems smooth out price spikes in the electricity market—and their expansion in Germany continues to gain significant momentum. The study “Battery Storage Is a Lever for the Energy Transition – Large-Scale Storage Flattens Electricity Prices” (Fokus Volkswirtschaft No. 555, August 2026) summarizes the current state of the German and European storage markets. We’ve summarized the key findings for you.
A market that grows eightfold every five years
According to KfW, installed battery storage capacity in Germany has increased more than eightfold in just five years: As of early June 2026, it stood at around 19 gigawatts, with a total capacity of approximately 29 gigawatt-hours. This development is driven primarily by the decline in the price of lithium-ion cells, which has fallen by about 99 percent since 1991. KfW researchers attribute this to a so-called learning rate of about 19 percent: Every doubling of global battery capacity reduces prices by this amount—an effect that is significantly amplified by electric mobility, which accounted for the majority of global demand for lithium-ion capacity in 2025.
While residential storage systems still dominate the German market in terms of volume, a look at grid connection requests for large-scale storage systems—that is, the systems we develop at Extensio—shows where the industry is headed: In 2024, grid operators received requests for approximately 400 gigawatts of capacity. Even though only a fraction of these requests has been approved so far, the approved capacity already represents a sevenfold increase over the current large-scale storage capacity.
The economic benefit: smoothed electricity prices
The study’s key empirical finding is particularly interesting: large-scale battery storage systems have been shown to help mitigate fluctuations in electricity prices. For a panel of 13 European electricity price zones, the KfW analysis shows that higher installed large-scale storage capacity is associated with a noticeably narrower spread between daily peak and trough prices. Specifically, the more large-scale storage capacity is installed in a price zone, the less sharply typical midday prices decline and the lower evening price peaks are.
According to the study, when extrapolated to the expansion of storage capacity in Germany over the past three years, this translates to a reduction in daily price volatility of about one-fifth compared to a scenario without this expansion. Noteworthy here is a methodological approach taken by the authors: They deliberately analyze the installed capacity rather than actual charging and discharging activity in order to clearly distinguish between cause and effect. Residential and commercial storage systems serve as a control group; since they are primarily optimized for self-consumption rather than price-driven, they—as expected—show virtually no such smoothing effect. This supports the interpretation that the observed effect actually originates from market- and price-driven large-scale storage systems.
The network bottleneck as the biggest hurdle
However, KfW also openly acknowledges the limitations of the current system. Because Germany has a uniform exchange-based electricity price, local grid bottlenecks have so far remained invisible to storage operators—a large-scale storage facility can charge or discharge purely based on price, without taking into account whether an overload is currently threatening that specific grid node. In some cases, this can even exacerbate existing bottlenecks. The study sees dynamic grid tariffs—differentiated by location and time—as a promising approach to directing storage facilities more specifically to where they actually relieve the grid—a development that the Federal Network Agency is also currently promoting.
KfW identifies the grid connection procedures themselves as the second major hurdle: Of the approximately 400 gigawatts of capacity applied for in 2024, only about 6 percent were actually approved. In our view at Extensio, this confirms an experience we’ve gained from our own projects—such as our current project in Chemnitz: A carefully prepared, technically well-thought-out permitting process is often the decisive factor for the success of a battery storage project today, even more so than the choice of technology alone.
What This Means for Investors and Project Developers
For us as project developers, the study confirms two fundamental strategic assumptions: First, the expansion of large-scale battery storage systems remains economically viable and will continue in light of the ongoing decline in costs. Second, the ability to successfully navigate the grid connection process and actually bring projects to the construction and commissioning stages is increasingly determining who benefits from this growth—because, according to KfW, not every grid connection approval actually results in a completed storage facility.
This is exactly where our projects come into play: from securing a site and navigating the permitting process to the implementation of turnkey large-scale battery storage systems.
Source: Moritz, H. and Rode, J. (2026). Battery Storage Is a Key Driver of the Energy Transition—Large-Scale Storage Smooths Out Electricity Prices. KfW Research, Focus on the Economy No. 555, August 19, 2026. View the study (PDF)
