What does Poland’s BESS boom mean for investors?

The next phase of Polish BESS growth will reward projects built for energy market participation. The need for storage is growing as Poland, and importantly interconnected markets, decarbonise increasing the potential upside for investors with the right optimisation and trading strategy.

Poland is set to experience unprecedented growth in utility scale BESS, from a current installed base of under 1GW to an expected 13GW by 2030. The funding required to meet these targets represents a unique opportunity for the right investor.

Underpinning this growth are strong contracted revenues resulting from the high de-rating factors (of up to 95%) given to energy storage in early capacity market auctions (up to delivery year 2028). This contrasts sharply with GB, where the equivalent 4-hour de-rating factor for 2028 was c. 42%.

Lucrative short-term revenues, due to the lack of saturation of ancillary service markets (aFRR and FCR), provided significant additional support for first movers in the initial years of operation.

Unsaturated ancillary service markets are driving short-term BESS revenues in Poland

(annualised margins for 4-hour, 50MW asset (maximum two cycle pers day asset)

However, de-rating factors have fallen sharply, dropping to c.13% for the 2030 delivery year. Ancillary service markets are shallow and by 2028 are expected to be fully saturated. Revenues in these ancillary markets will decline as prices shift from being set by marginal cost of expensive thermal generation to the lower opportunity cost of energy storage.

By 2030, merchant income from energy trading and ancillary-service markets will become the primary sources of value for Polish BESS. These revenue streams offer greater upside as market volatility and system-balancing needs grow as Poland, and interconnected markets, decarbonise. Capacity market contracts will transition to playing a supporting role in providing a valuable long-term underpinning of revenues.

Capitalising on this transition in the Polish market requires acquiring a deep understanding of policy and regulatory dynamics, a detailed view of the storage pipeline of both storage and competing flexible technologies, and fundamental market modelling capabilities to translate these factors into revenue implications.

Three takeaways for BESS investors

Why Capacity Market revenues are becoming less important for Polish BESS investors

The Polish Capacity Market was introduced as a security of supply mechanism to manage coal retirement by supporting new (gas-fired) capacity and selected existing coal plant for adequacy purposes. It became one of the main drivers of early BESS investment allowing large 4h projects to secure attractive, inflation-indexed long-term revenues.

These were supported in part by the high de-rating factors available (95% for T-5 2028 auction) which exceeded those of other European capacity mechanisms (42% equivalent in GB and 67%, although this may drop to 53%, in Italy).

However, de-rating factors have since fallen to c. 13%, suggesting future auctions will focus on firm dispatchable capacity (such as gas) rather than providing a strong long-term floor for BESS.

Poland, unlike other European capacity mechanisms, specifies a single de-rating factor for limited duration asset classes. BESS of 4-hour duration is prevalent as a result of the capacity market rules in place which stipulate that participants must be able to provide their contracted capacity for a continuous duration of at least 4-hours.

The current CM framework has effectively ended with the 2030 delivery year, and a new, successor adequacy mechanism is under preparation and discussion with the European Commission. Coal remains politically sensitive. Poland has used EU-level derogation to keep high-emission coal units in the CM until end-2028 (T-1 auctions), while further support beyond that remains under discussion due to adequacy concerns.

Early movers can capture ancillary service value, but the window is closing

Ancillary service markets (FCR and aFRR) provide significant short-term returns for the first storage projects to be developed. However, these markets are shallow, with total upwards and downwards volumes of c.200MW for FCR and c.500MW for aFRR, and with c.2GW of battery capacity expected to connect in 2028, the value of these services quickly falls.  

• FCR (Frequency Containment Reserve): a fast-acting (activation time of under 30 seconds) automatic balancing service which is used to quickly stabilise frequency deviations.
• aFRR (automatic Frequency Restoration Reserve): a slower acting (activation time of under 5 minutes) automatic balancing service which takes over from FCR to restore grid frequency to 50Hz.
• mFRR (manual Frequency Restoration Reserve): a slow acting (activation time of under 12.5 minutes) balancing service the activation of which is triggered by the Polish Transmission System Operator (TSO) Polskie Sieci Elektroenergetyczne (PSE). It takes over from aFRR and typically addresses long deep imbalances on the grid.

FCR is the smallest ancillary market of typically 200MW in volume. Prices in the first half of 2026 have averaged €25/MW/h for upwards and downwards response. The need for fast-acting response makes this an ideal service for BESS. However, the limited volume requirement means this market will quickly become saturated with prices dropping sharply as they realign to the opportunity cost of foregone revenues in energy markets.

The overall volume requirement is determined at the Continental Europe synchronous area level and then proportioned out to system operators based on their share of net generation and consumption. For continental Europe the minimum requirement for FCR is 3,000MW. Once this service becomes saturated, accounting for growth in the volume requirement, revenues available from this market will not recover.

The aFRR market is larger than FCR, typically 500MW of upwards and downwards response is procured, with prices in the first half of 2026 averaging between €40-50/MW/h. Unlike FCR which is solely procured within Poland aFRR energy, via the PICASSO platform, can be procured across borders. Lower and less volatile prices should result, but IT and liquidity issues in connected markets have resulted in substantial price spikes and troughs since go-live.

For early movers, the aFRR market is a source of substantial returns, at c.€500/kW/yr for aFRR capacity based on annualised H1 2026 revenues for aFRR capacity. Similarly to FCR, as the c. 11GW of capacity procured through the Capacity Market connects these prices will be cannibalised down to substantially lower levels.

Volumes and prices available in the mFRR market approach those seen in aFRR. However, short duration storage assets are less well suited to this market.  If called upon, activations can be both deep and sustained depleting storage and potentially leading to penalty payments and loss of reputation with the system operator. Thermal peaking assets and longer duration storage assets are better placed due to the slower activation times and length of response required.

Why energy market participation will determine long-term value

Coal has historically been the backbone of the Polish electricity system, but its share in the energy and capacity mix has been steadily declining. Carbon (EU ETS) prices are expected to increase as Europe seeks to decarbonise, putting the economics of ageing coal plant under increasing pressure. In neighbouring Czechia similar pressures have led to Sev.en Energy announcing the closure of three coal plant (2.4GW) across 2026/27.

The installed capacity of renewables has more than doubled since 2021, driven by aggressive solar growth. In addition, the rapid decarbonisation of neighbouring interconnected markets (in particular Germany) means that the fundamental need for flexibility continues to grow.

Significant investment is necessary in electricity generation to meet growing demand and fill the capacity gap left by coal. Due to climate goals and cost, the bulk of the new generation will come from renewable resources, increasing the volatility in energy markets.

Prices spreads have widened:

• Increased coal and gas prices have raised power prices particularly in peak periods.
• Increased renewable generation has lowered price minimums, most noticeably in the summer 2024 and 2025 periods as a result of increasing solar capacity.

Significant investment is necessary in electricity generation to meet growing demand and fill the capacity gap left by coal. Due to climate goals and cost, the bulk of the new generation will come from a combination of gas, nuclear and renewable resources. 

Increasing renewable capacity will lead to frequent and longer periods of excess renewable generation. Negative and zero prices will therefore become more common, widening the spread between high and low prices and increasing arbitrage margins for storage assets.