Backup power for Europe - part 8: Ranking BESS market attractivity in the Nordics

This report examines BESS market conditions in Denmark, Norway, Sweden, and Finland as part of our broader series on European BESS markets.

Like elsewhere in Europe, BESS is gaining momentum in the Nordic region. An increasing share of renewable generation capacity combined with electrifying demand is boosting the need for flexibility. Although energy storage is already widely available in the region in the form of hydropower, batteries are increasingly playing a role in providing short-term flexibility to the grid.

The Nordic[1] BESS market is emerging with a capacity of just over 1.25GW and 500MW of projects under construction, predominantly in Sweden, Finland, and Denmark. Excluding Norway, the proportion of installed BESS capacity to total electricity generation in the region is comparable to that in Germany, where 3GW of BESS is already online. Like in Germany, we expect BESS capacity to grow significantly over the next few years to around 5GW by 2030. As shown in figures 1 and 2, most of the activity is happening in Sweden and Finland. Danish projects are emerging at a slower pace, but still in proportion to the size of the country’s electricity system. In Norway, however, although it’s the second-largest power market in the region, we expect only a few small-scale projects, if any, to come online due to its dominant share of hydropower.

The Nordic power system is highly integrated, with strong internal interconnection and links to the UK, Germany, the Netherlands, Poland, and the Baltic states. This supports cross-border trade and system flexibility by balancing complementary generation resources. However, renewable build-out is outpacing grid expansion, and congestion is becoming more prominent within and between markets. At the same time, uncertainty around new interconnection projects is increasing. Sweden’s decision to pause the Konti-Skan Connect link with Denmark illustrates how political and regulatory disputes can delay projects. This suggests that the expansion of interconnection capacity may be more constrained, maintaining price differences and increasing the need for local flexibility, which in turn strengthens the role of battery storage in managing congestion and balancing Nordic power systems.

[1] In this report, we exclude Iceland from the analysis.

BESS projects in the Nordic region derive revenues from a combination of energy market participation and ancillary services. The relative contribution of these revenue streams differs across countries and will change over time due to variations in demand, generation mix, and existing BESS capacity.

At present, ancillary services constitute the primary source of revenue for most operational battery assets. These include frequency containment reserve products (FCR-D and FCR-N), fast frequency reserve (FFR), and balancing services such as automatic and manual frequency restoration reserve (aFRR and mFRR). These markets provide both capacity payments and, depending on activation, additional energy revenues.

However, rising participation by batteries could eventually lead to market saturation, which is already observed in the smaller FFR and FCR markets. As a result, revenues in these markets are declining, and value is shifting toward aFRR and mFRR. Potentially, these services may also become saturated by batteries, but we don’t expect this to happen in the short term as they are significantly deeper and the Nordic transmission system operators (TSOs) project an increase in demand over the next few years, as we show in the following sections.

Because ancillary services still offer attractive revenue potential, most Nordic BESS projects consist of one-hour or two-hour systems. Four-hour or even eight-hour systems that are emerging in the rest of Europe are more suitable for a higher share of energy arbitrage and are therefore not the most cost-effective option for the Nordics.

Besides ancillary service participation, BESS projects can trade energy across the day ahead, intraday, and imbalance markets. These energy arbitrage opportunities are increasingly influenced by the growing penetration of variable renewable energy such as wind and solar, which increase price spreads. In several Nordic markets, structural imbalances between generation and demand, combined with transmission constraints, are contributing to persistent price volatility.

Most of the battery projects currently online run on a merchant business model. BESS projects in the Nordics cannot benefit from capacity mechanisms, as security of supply is not an issue at the moment. Contracted revenue models are, however, beginning to emerge. These include tolling agreements and structured arrangements that provide partial revenue certainty. At the same time, regulatory aspects such as grid tariffs and the continued application of double charging for storage remain important determinants of project economics across the region.

The Nordic region offers a differentiated landscape for battery storage development. Market attractiveness is determined by a combination of revenue potential, regulatory conditions, and grid-related constraints.

Revenue opportunities are supported by relatively high price volatility and well-developed ancillary service markets. At the same time, the overall deployment of battery storage is still at an early stage compared to more mature markets, such as the UK. Moreover, the offtake environment remains in an early stage of development, although a few deals have been signed recently.

Among the Nordic countries, Sweden and Finland currently show the strongest combination of market maturity and revenue visibility. Denmark offers strong price signals but faces significant constraints related to grid access. Norway remains less attractive due to the characteristics of its power system. In the following sections, we delve deeper into the challenges and opportunities in each of these markets.

Sweden

Sweden is the largest electricity market in the Nordic region and has the most developed battery storage market. The Swedish power system is characterized by strong growth in onshore wind and solar generation, combined with structural transmission constraints between the north and the south of the country. Both these factors create a growing demand for flexibility.

Swedish BESS revenue potential is currently the highest within the Nordic region and is even among the highest in Europe. Ancillary services play a central role in the revenue stack. While increasing battery participation has led to oversubscription and decreased prices in FFR and FCR, the mFRR market is currently deep enough to provide attractive revenues for batteries (see figure 4). At present, aFFR is not a viable option for Swedish BESS. Demand in the mFRR market is expected to grow significantly over the coming years (see figure 5). In addition, aFRR participation will become a possibility when Sweden joins the pan-European Platform for the International Coordination of Automated Frequency Restoration and Stable System Operation (PICASSO) at the end of Q4 2027. As a result, we expect that ancillary services will remain the main source of income for Swedish BESS through 2030.

On top of the attractive ancillary services, the southern bidding zones (SE3 and SE4) offer relatively attractive arbitrage opportunities, with price spreads that are on average comparable to those in Germany and the Netherlands (exceeding EUR 100/MWh in SE4). The presence of hydropower and lower electricity demand in the northern bidding zones (SE1 and SE2) results in significantly lower arbitrage opportunities, making these zones more suitable for ancillary services.

In contrast to the attractive revenue potential, high grid fees can put pressure on the business case. Storage assets are subject to double charging through both injection and withdrawal fees. Grid tariffs in Sweden are applied on a zonal basis and reflect regional congestion. Next to a capacity fee (in EUR/kW/year) there are network losses in EUR/MWh, which for BESS results in an additional cost in the north and a benefit in the south. For a two-hour project that cycles 300 times per year and has a round-trip efficiency (RTE) of 90%, grid fees range between EUR 6.04/kW/year in SE1 and EUR 6.33/kW/year in SE4.

Finland

Finland is becoming the new focal point for BESS projects in the Nordics. Like in Sweden, a growing renewable generation capacity, particularly onshore wind, in combination with a high share of firm nuclear generation, is creating an increasing demand for flexibility services. Whereas the current capacity is about half that of Sweden (which is proportionate to the two countries’ electricity systems), Finland currently has more projects under construction.

Although revenue potential is lower than in Sweden, Finnish grid conditions are more favorable in terms of availability and fees. Ancillary services still play the most important role, but saturation is driving down prices in the FFR, FCR, and aFRR markets. Over the next few years, Fingrid (Finland’s TSO) will increase demand for ancillary services by around 400MW, which will create some headroom for additional BESS participants. In contrast to Sweden, BESS can participate in aFRR, but the TSO’s demand for this service is relatively low. The highest potential can be found in the mFRR service, where BESS participation is relatively low. In addition to strong ancillary services, Finland offers above-average energy arbitrage opportunities, with day-ahead price spreads averaging above EUR 90/MWh over the past 12 months.

Grid fees are roughly half of those in Sweden. Although Finnish BESS is also subject to double charging, energy storage is exempt from paying a consumption fee, which is particularly high during winter weekdays. Instead, energy storage projects pay a fixed capacity fee for input and output. Combined, these fees are equal to the input fee paid by generators. In addition, energy storage projects pay a fee for every MWh of energy fed into or extracted from the grid. Obtaining a grid connection is becoming more difficult in congested areas like southern Finland, but Fingrid will likely incentivize new BESS projects to locate in low-congestion areas by offering a discount on the capacity fee.

Denmark

Denmark is by far the smallest power market in the region, but it also has by far the highest share of wind and solar. Currently, Danish BESS capacity is around 110MW, but with the projects that are under construction or have obtained their permits, capacity could grow toward 500MW in the next three to four years.

In terms of market conditions, Denmark presents an interesting case for BESS. As a result of the high share of renewables, Danish price spreads are the highest in the region and even among the highest in Europe. Over the past year, price spreads were EUR 120/MWh in bidding zone DK1 (western Denmark) and EUR 126/MWh in DK2 (eastern Denmark). The role of batteries in ancillary services is still developing, although participation has already been established in several services. Demand for balancing services will grow over the longer term and will stay significantly larger than the total installed battery capacity (see figure 10).

At the same time, grid constraints represent a major challenge. As of April 2026, the Danish TSO Energinet has announced a temporary pause on new grid connections due to increasing grid congestion. The waiting list for connection agreements exceeds 60GW, driven primarily by data centers and energy storage projects. This pause and the uncertainty about how Energinet will deal with new connection requests create a critical bottleneck for new BESS projects.

On top of the limited grid availability, grid costs also put the Danish BESS business case under pressure. Energy storage is subject to double charging, and fees are the highest in the Nordic region. The capacity fee alone is more than three times higher than in Finland, although this fee can be significantly reduced under a limited grid access agreement. Energy-based fees are comparable to those in Finland, but on top of those, Energinet levies a system tariff for every MWh extracted from the grid.

Norway

Norway currently offers limited opportunities for battery storage. The power system is dominated by hydropower, which provides a high degree of programmable clean energy and reduces the need for additional storage capacity. As a result, price volatility is relatively low, and arbitrage opportunities are more limited. In addition, demand for ancillary services that can be provided by batteries is also less pronounced.

Currently, only a few BESS projects are online in Norway, most of which are relatively small. Given the absence of announced projects in the pipeline and Norway’s particular electricity system, we do not expect much activity in this country. Investors interested in building new capacity will face low price spreads and high grid fees.

Finland scores strong across the board; Sweden and Denmark offer the strongest market conditions

In table 5, we summarize the analyses of the individual countries in the same way as we did in part 1 of this report series. The table shows that, with the exception of Norway, all countries score high on attractiveness. Finland scores strongly across all categories, apart from capacity markets, which are not available in any of the countries. Denmark and Sweden both score higher for the day-ahead and ancillary market conditions, but have less attractive grid conditions.

The Nordics offer an interesting market for BESS. The first wave of projects has already come online and is showing attractive returns. The high share of renewable energy and the growing pressure on the grids are shaping the demand for the flexibility offered by BESS.

Our analysis shows that within the region, conditions vary by country. Sweden has had the largest growth thanks to its high revenue potential, but grid constraints are now shifting focus toward Finland. Denmark’s energy mix is, at first glance, ideal for rapid BESS deployment, but the current grid lock and high fees are slowing down development, while in Norway the dominance of hydropower makes the market virtually impossible for serious BESS penetration.

In general, we expect the Nordic BESS markets to mature in terms of the revenue model. While the majority of projects currently online run on a merchant structure, we expect future deals to be more focused on offtake agreements such as tolling agreements or floors. Over the past year, the first such agreements have emerged.

With respect to technology, we expect the duration of BESS projects to stay in the one- to two-hour range, as ancillary services are likely to continue to provide the majority of revenues over the next few years. This is in contrast to Western and Central Europe, where four-hour projects offer a strong trade-off between ancillaries and energy arbitrage, and to the sunnier regions of Southern Europe where eight-hour projects are emerging as the technology of choice for integrating solar power.