Regulatory Headwinds Hit Commercial Energy Storage Markets in the US and Europe

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Regulatory Headwinds Hit Commercial Energy Storage in US and Europe | Voltrasys

Regulatory Headwinds Hit Commercial Energy Storage Markets in the US and Europe

Commercial battery energy storage installation

Photo: Unsplash / dcbel

Table of Contents

Overview

Analysts at the Energy Storage Summit 2026 in London warned that regulatory uncertainty is now one of the biggest obstacles to growth in commercial battery storage across both the United States and Europe. Despite record global installations in 2025 and strong demand projections for 2026, policy volatility — from shifting US tariff regimes to unstable capacity market rules in Europe — is slowing project timelines and complicating financing, particularly for smaller commercial operators.

What Analysts Said at Energy Storage Summit 2026

The Energy Storage Summit 2026, staged in London on February 24–25 by Solar Media (part of Informa Markets), brought together developers, investors, and policymakers for the industry’s first major gathering of the year. Two analysts from Wood Mackenzie took center stage: global energy storage lead Allison Weiss and principal EMEA analyst Anna Darmani.

Both emphasized that neither the US nor Europe is a single homogeneous market. The right revenue model — subsidy-backed contract, capacity market agreement, or fully merchant — depends heavily on the developer’s risk appetite and the specific sub-market they’re entering. Unexpected rule changes to capacity markets, they noted, can materially affect a project’s internal rate of return at any stage of development or operation.

United States: Tariffs, Targets, and Interconnection Delays

Weiss pointed to regulatory unpredictability as a direct cause of reduced US storage capacity coming online in 2026 compared to 2025. During a stretch of mid-2025, contracts went unsigned and financing decisions stalled — partly driven by evolving import tariffs and a legislative scramble to lock in projects before new restrictions took effect. Battery storage costs rose an estimated 56% to 69% from January 2025 onward due to those tariffs.

The picture is uneven across states. Eleven states have energy storage targets, but enforceability varies widely. New York, for example, is at risk of missing its 6 GW by 2030 goal due to delays in standing up a support program for utility-scale storage — a signal that the policy foundation underpinning commercial-scale projects remains shaky even in storage-friendly states. Interconnection queue backlogs were flagged as a shared constraint across virtually every US market.

Europe: Hot Markets, Fragile Revenues

Darmani identified Germany and the United Kingdom as the hottest European markets in 2026, but cautioned that both require tolerance for merchant risk, as most revenue in those markets comes from uncontracted, market-rate activity rather than fixed agreements. The number of European countries with formal storage targets has grown from seven to seventeen over the past two years — progress that signals expanding demand, but not guaranteed bankable revenue.

Revenue fragility was a recurring theme. Engie’s head of flexibility and structured origination, Martin Daronnat, said at the Summit that more hedging instruments may be needed industry-wide to protect battery revenues in Europe. A proposed change in Germany that would end a grid fee exemption for storage was flagged by Fluence’s Germany managing director as a near-term threat to project economics in that market specifically.

What This Means for Light Commercial Operators

For businesses deploying light commercial energy storage systems — typically in the 10 kWh to several hundred kWh range — the Summit’s findings carry practical implications. The 30% Investment Tax Credit (ITC) in the US remains intact for now and continues to cut payback periods to the 3–5 year range for qualifying commercial installations. Germany’s KfW subsidy program offers comparable relief on the European side, covering up to 30% of system costs.

However, commercial buyers should factor regulatory risk into their procurement timelines. Incentive structures are subject to change, interconnection timelines are lengthening, and financing for merchant-revenue projects has become more selective. Locking in contracts and incentive applications early, while conditions remain favorable, is the clearest near-term risk mitigation strategy available to commercial energy storage buyers in both regions.

On the cost side, system pricing for commercial lithium-ion storage currently ranges from roughly $280 to $580 per kWh installed in the US, with larger containerized deployments achieving lower per-kWh figures. Prices are expected to continue declining through the decade as manufacturing scale increases and competition from Chinese cell producers intensifies across export markets.

Sources

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