Battery Energy Storage Systems: financing the next phase of energy transition

Battery Energy Storage Systems (BESS) are becoming an increasingly strategic component of the global energy transition. As renewable generation capacity expands, storage infrastructure is critical to ensuring grid stability, managing intermittency and enabling more flexible power markets. The scaling of BESS deployment therefore requires not only technological advancement but also robust financing frameworks capable of supporting complex and evolving business models.

In this context, Santander Corporate & Investment Banking (Santander CIB) recently hosted its second Battery Energy Storage (BESS) client event at its London Triton Square office, bringing together more than 100 professionals from leading corporates, developers, investors, advisers and policymakers across the sector.

The discussions reflected the growing maturity of the storage market, while also highlighting the structural challenges that remain. As revenue models evolve, spanning capacity markets, ancillary services, merchant exposure and hybrid renewable-plus-storage structures, financing approaches must adapt to new risk profiles and contractual frameworks.

BESS financing and project structuring in a merchant environment

Unlike traditional generation assets with long-term offtake agreements, many BESS projects operate within dynamic market environments. Revenue stacking, combining multiple income streams, can enhance project viability but also introduces forecasting complexity. Lenders and investors therefore assess projects through the lens of volatility management, contract strength and sponsor capability.

As highlighted during the event, strategic advisory and debt financing expertise are increasingly intertwined in storage transactions. Early engagement on capital structure design, covenant flexibility and downside scenarios can significantly improve bankability and execution certainty.

Case studies shared at the event illustrated how innovative financing structures can support the build-out of successful BESS platforms. These examples demonstrated the importance of aligning technical performance expectations with realistic financial assumptions and risk allocation mechanisms.

Energy storage infrastructure and value chain coordination

The development of storage infrastructure requires coordination across the value chain, including equipment manufacturers, developers, utilities, investors and policymakers. Regulatory clarity and market design play an important role in shaping long-term investment confidence.

Events that convene diverse stakeholders contribute to a shared understanding of evolving market standards and financing practices. By facilitating dialogue between industry participants, financial institutions can help accelerate the adoption of more replicable and scalable structures.

Santander’s integrated platform, spanning strategic advisory and debt financing,reflects the growing need for holistic solutions in energy transition sectors. As BESS projects scale in size and complexity, combining sector insight with disciplined structuring becomes increasingly important.

Looking ahead: outlook for BESS and grid stability

The continued expansion of renewable generation across Europe and other regions is expected to drive sustained demand for battery energy storage systems. As electricity systems decentralise and electrification accelerates, grid-scale BESS infrastructure is likely to play a central role in balancing supply and demand.

Financing frameworks will evolve alongside regulatory and market developments. Institutions capable of combining market insight, advisory expertise and capital mobilisation will be well positioned in the growing battery storage project finance market.

As the energy transition progresses, scalable and bankable BESS financing solutions will remain critical to supporting grid reliability and long-term decarbonisation pathways.