Declining feed-in tariffs, increasing price volatility, and limited grid connections present wind farm and large-scale PV plant operators with new economic challenges. Electricity is increasingly being generated when prices are low or even negative – with direct impacts on revenue. In this dynamic environment, Co-Location BESS from optional addition to existential necessity for plant operators and investors.
By combining a generation facility and a battery storage system at a common grid connection point, a flexible system, which not only produces electricity but also markets it strategically. Co-location ensures efficient use of capacities, higher revenues, and reduced costs. Furthermore, such systems can be classified as grid-supportive and benefit from regulatory advantages.
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At its core, co-location describes the combined connection of a generation facility (solar or wind) and a battery energy storage system (BESS). to a central network interconnection point. Both systems share not only the physical space but also the cost-intensive infrastructure, such as transformers and substations. Depending on the technical and regulatory integration, two main models are distinguished in Germany:
- Green electricity co-location The storage is charged exclusively with electricity from the directly connected renewables facility. The aim is to shift generation peaks to more valuable market hours.
- GrayStream Co-Location: The storage system can additionally draw energy from the public grid. This allows for significantly greater flexibility, as the storage system can generate additional revenue independently through energy arbitrage or participation in grid services markets.
- Hybrid ColocationMultiple PV and/or wind power plants with storage at a factory grid are considered a single integrated asset behind the main meter. Combinations of different renewable energy sources and storage technologies are possible. This option is very suitable for innovation tenders.
So far, this distinction has been due to EEG funding logic strictly necessary to avoid jeopardizing the claim to remuneration through mixed operation with grid power. However, the regulatory framework is changing. Through new regulations such as MiSpeL (Marketing integration of storage and charging stations) this problem will increasingly be softened in the summer of 2026. Co-location facilities can today with intelligent measurement concepts secure EEG funding and also benefit from investment grants from innovation tenders.
Technical Coupling Types: AC vs. DC
Depending on where the BESS is integrated into the system, two concepts are distinguished:
- DC Coupling: The storage system is integrated on the DC side, i.e., before the inverter of the renewable energy system. This is often more efficient, as conversion losses (from DC to AC and back) are minimized.
- AC coupling Here, the storage is connected on the AC side behind the inverter. This model is particularly flexible for retrofitting existing parks, as the generation system remains largely untouched from a technical standpoint.
The central components of a co-location system
For the individual components to form an economically optimized overall system, the following building blocks are crucial:
- The EE power plant: Supplies primary renewable energy directly at the common connection.
- The Battery Energy Storage System (BESS): Acts as a flexibility element for buffering, smoothing, and time-shifted feeding.
- The Energy Management System (EMS): This is the control software that links generation, storage, and the power market. It evaluates prices, weather forecasts, and storage levels in real-time to make automated trading decisions.
Stand-Alone Storage vs. Co-location
A stand-alone BESS is directly connected to the public grid via its own connection and, unlike co-location, not coupled with a generation plant. It charges and discharges Mains power only and can therefore react extremely flexibly. This applies to internal company signals such as Time shifts or peak loads, as well as for external signals, such as arbitrage through real-time spot/intraday prices or bottleneck management in the public electricity grid.
For co-location of purely generation facilities, the focus is clearly on Marketing of green electricity. Here, the BESS ensures optimized and time-shifted feeding in while simultaneously utilizing the existing connection capacity for efficiency. If a consuming company operates a co-location storage system, the goals expand. Then, the primary objectives are most often maximizing self-consumption and peak shaving.Peak Shaving) or Atypical grid usage At the center. However, revenues from electricity trading and balancing energy are also possible.
Green Power Co-location: Focus on Renewable Energy Feed-in
In the green electricity colocation model, the BESS serves as an exclusive flexibility tool for locally generated energy. In this configuration, the BESS is exclusively charged with electricity from the directly connected wind or photovoltaic system. No grid supply is used to charge the batteries.
The main goal of a green power co-location configuration is to optimize the capture rate. Since renewable energy plants often feed in simultaneously when supply is high and prices are low, their achieved market value is frequently significantly below the average stock market price. The green power storage acts as a buffer here. It shifts the feed-in of generation peaks to hours with higher price levels. Market analyses show that this increases the capture rate by approximately 10 to 15 % can be increased.
Since the BESS does not draw power from the grid and thus already provides a clear accounting separation between grid and green electricity, this co-location system also simplifies obtaining the EEG funding for the fed-in electricity. Furthermore, green electricity storage is often a central component of bids in Innovation tenders, in which plant combinations are subsidized with a fixed market premium.
Graustrom Co-Location: Maximum Flexibility
The gray stream co-location breaks the strict dependency on local generation. Here, the generation plant and storage share the grid connection, but the BESS can draw power from both its own plant and Energy from the public power grid access. This expands the revenue potential of the storage system with Front-of-the-Meter (FTM) applications. In this scenario, the BESS becomes a true market participant. Operators benefit through Power trading and additional earnings through Control energy generate.
Due to the highly efficient utilization, gray power co-location models often achieve significantly higher returns. Current analyses quantify the potential for Internal Rate of Return (IRR) of approximately 12 to 18%, while purely green models often fall within the range of 8 to 12 %. Total revenue could increase by 50 to 100 % higher outages than with pure green electricity solutions.
However, the biggest hurdle for gray electricity models has so far been the complex demarcation from EEG funding, which, however, is now being massively defused by the Federal Network Agency. Through intelligent metering concepts, operators will be able to utilize the advantages of free market trading in the future without jeopardizing the financial security of their renewable energy plants.
Why Co-location Pays Off
The combination of generation and storage (BESS) at the same location transforms a volatile asset into a predictable revenue machine. The economic benefits can be divided into three core areas:
1. Maximizing network utilization (CAPEX efficiency)
The grid connection is often the bottleneck and a significant cost factor in renewable energy projects.
- Higher energy throughput Co-location allows more energy to be marketed through the same connection point, without having to physically expand the connection capacity.
- Avoiding throttling The plant does not need to be shut down in the event of grid bottlenecks or negative prices. Instead, the electricity flows into the BESS and is fed back into the grid profitably later.
- Infrastructure Synergies Because the transformers, lines, and substation are shared, the specific investment costs per installed kilowatt-hour are lower compared to stand-alone systems.
2. Optimization of ROI & IRR
A co-location system diversifies the risk profile and increases profitability:
- Increasing the capture rate: Through time shifting of the feed-in (energy shifting), the park operator achieves a higher average price per kilowatt-hour sold.
- Additional revenue streams: Especially in gray power operation, very high revenues can be generated through energy trading and balancing power (FCR/aFRR), which are completely independent of the weather.
- Attractive returns While pure PV or wind projects often face price pressure, co-location projects achieve an equity return depending on the operating model.IRRof 12 % to 18 %.
3. Risk Management & Future-Proofing
- Protection against negative prices Operators bypass the risk of having to pay for feeding in electricity at negative prices or losing the market premium.
- Bankability The stabilized cash flows from the storage increase bank and investor financingability, as the dependence on pure weather forecasts decreases.
Conclusion
Pure feed-in is no longer worthwhile for operators of generation facilities. In a market with high volatility and tight grid capacities, Co-location: The New Standard for economic renewable energy projects.
By coupling generation and storage, PV and wind farms become flexible market participants capable of actively managing their revenues. Whether securing EEG feed-in tariffs through the green electricity model or maximizing profits in grey electricity trading: co-location is the Strategic Return Boosters, which ensures the long-term economic viability of renewable energies.