The transition to renewable energy sources is a key strategy in mitigating climate change, underscored by international agreements like the Paris Agreement and the European Union’s target of sourcing 42.5% of its energy from renewables by 2030. However, integrating Variable Renewable Energy (VRE) sources, such as solar and wind, presents significant challenges for grid stability and balancing costs.

This study empirically investigates the impact of increasing Battery Energy Storage Systems (BESS) capacity on European balancing market prices. Using time-series data from five European countries between 2016 and 2019, multivariate regression models are applied to analyze the effects on three types of balancing services: Frequency Containment Reserve (FCR), Automatic Frequency Restoration Reserves (aFRR), and Manual Frequency Restoration Reserves (mFRR).

The results indicate that increased BESS capacity significantly reduces balancing prices, particularly in the FCR and aFRR markets. This research extends the findings from previous studies in Australia to the European context, highlighting the potential of BESS to offer cost-effective, CO2-neutral solutions for grid stability.

These findings have important implications for Transmission System Operators (TSOs), policymakers, and stakeholders in the energy market, suggesting that specific policy and strategic investments in BESS could enhance the cost-efficiency and sustainability of future electricity systems.