As energy transition accelerates, Battery Energy Storage Systems (BESS) are emerging as a critical component of the power system. However, financing these assets requires a strategic approach, balancing market exposure with predictable revenue streams.
Recently, Aurora Energy Research’s South Eastern Europe (SEE) Research Team hosted an exclusive in-person Group Meeting on BESS financing in Greece, bringing together key industry players. The discussion centered on the feasibility of different investment models, with a special focus on tolling agreements—a financing approach that is expected to gain momentum in Greece and the broader SEE region.
The financing landscape: risk vs. stability
Aurora’s analysis outlines four main investment models for integrating BESS into the Greek power market, each offering a different balance between stability and potential returns.
- Pure merchant trading: high risk, high reward
In a merchant-only model, BESS operators rely entirely on wholesale and balancing markets, profiting from price fluctuations. While this strategy offers potentially high returns, it comes with significant exposure to market volatility.
However, as Panos Kefalas, Research Lead at Aurora Energy Research, pointed out, merchant financing is not yet common in South Eastern Europe (SEE). Banks in the region remain cautious about merchant-based investments, preferring business models with contracted revenues—especially for new technologies like BESS.
- Upside: Maximum exposure to high electricity prices can yield substantial profits.
- Downside: No guaranteed revenue, making it difficult to secure financing.
- Investor Profile: Risk-tolerant private investors and trading firms.
- Capacity remuneration mechanism (CRM) + merchant trading: a balanced approach
A CRM-backed model provides higher revenue certainty as a share of revenues can be fixed, ensuring a minimum level of financial security while allowing additional gains through market trading.
This structure reduces financial risk, making it more attractive to banks and institutional investors. According to Aurora’s research, banks in Greece and Hungary have already financed BESS projects under such structured revenue models, and similar interest is growing in Romania and Bulgaria.
- Upside: Lower risk due to guaranteed payments from CRM.
- Downside: Partial exposure to market fluctuations still requires financial hedging.
- Investor Profile: Institutional investors and funds seeking a hybrid risk-reward model.
- Tolling agreements: the future of BES financing in SEE
One of the hottest topics at Aurora’s Group Meeting was the tolling agreement model, which is rapidly gaining traction in mature BESS markets.
A tolling agreement is a bilateral contract where a BESS owner leases the asset to a trader or offtaker, who operates it in exchange for contracted revenues. This arrangement provides stable and predictable cash flows, making it highly attractive to financiers.
Aurora’s detailed Greek market analysis suggested how tolling agreements can be structured, providing a blueprint for early adopters in the region.
- Why It Matters: Contracted revenues are essential for securing financing. SEE banks are not yet ready to finance fully merchant BESS projects, but tolling agreements offer a bankable alternative.
- How It Works: The BESS owner earns guaranteed revenue, while the trader optimizes market participation, profiting from arbitrage and ancillary services.
- Investor profile: Institutional investors and banks seeking low-risk, predictable returns.
Tailoring risk exposure: fixed, variable, or hybrid pricing
Tolling agreements offer flexibility in structuring payments:
- Fixed Fee: Guaranteed income, reducing market exposure.
- Variable Fee: Revenue depends on market performance, with risk-sharing between owner and trader.
- Hybrid Fee: A combination of fixed and variable components, balancing stability and potential upside.
Aurora expects tolling agreements to soon become standard in Greece and SEE, as they bridge the financing gap and provide an entry point for BESS deployment.
- Subsidy + Merchant Trading: Leveraging government support
A subsidy-backed model combines investment grants or Contracts for Difference (CfD) with market trading.
- Upside: Lower upfront investment risk, providing early-stage financial security.
- Downside: Relies on government policies and subsidy availability.
- Investor Profile: Investors prioritizing low-risk, policy-backed revenue streams.
Aurora’s analysis highlights a clear financing hierarchy for BESS across South Eastern Europe:
- Subsidies and CRM-backed models provide early-stage financial security.
- Tolling agreements are the most bankable route for private financing.
- Merchant financing is not yet viable — it may only emerge once banks are comfortable with merchant solar projects first.
As Greece and neighboring SEE markets develop regulatory frameworks and market mechanisms, BESS investment strategies will continue evolving. Industry professionals across the region should stay informed, leverage structured financing models, and actively engage in market discussions to unlock the full potential of energy storage in SEE.