The European Network of Transmission System Operators for Electricity (ENTSO-E) has released a new policy paper emphasizing the urgent need for a coordinated and system-optimised deployment of utility-scale energy storage to support Europe’s decarbonisation goals.

As variable renewable energy (vRES) continues to grow across Europe, energy storage is increasingly critical to maintaining security of supply, enabling efficient system operation, and integrating renewable generation. The policy paper examines how Europe’s electricity market design can accelerate the cost-effective deployment and operation of utility-scale storage, building on recent EU market reforms.

The report analyses three investment frameworks for storage: merchant investments, capacity mechanisms, and non-fossil flexibility support schemes. It identifies key barriers to deployment, including regulatory uncertainty, limited long-term revenue visibility, and insufficient locational signals.

Key recommendations include:

• Strengthening merchant investments: Ensure non-discriminatory access to all value streams, remove double network charges, enhance locational transparency, and enable flexible connection agreements. Complement market revenues with EU or national de-risking tools to support large-scale investments.

• Adapting capacity mechanisms (CMs): Align auction timings with storage lead times, apply duration-differentiated derating factors, allow multi-year contracts, and introduce locational signals to guide storage deployment where it maximizes system value.

• Implementing non-fossil flexibility support schemes (NFFSSs): Provide long-term revenue stability, granular locational signals, operational incentives for system-friendly behaviour, and coordination with national CMs to avoid double remuneration.

• Optimizing operational use: Encourage flexible connection agreements, dynamic grid tariffs, market rules that limit congestion, ramping constraints for fast-response storage, and, where necessary, bidding zone reconfigurations.

ENTSO-E emphasizes that deploying storage is not enough; it must be operated where and when it delivers the highest system value. Combining well-designed investment frameworks with operational rules is essential to unlock the full potential of energy storage and support Europe’s secure, efficient, and decarbonised power system.

The full report includes detailed analyses and case studies from Belgium, Italy, and Germany, illustrating emerging approaches to storage deployment across Europe.