Lincoln International’s experts outline the factors fueling development and opening opportunities for investors in battery energy storage.

Factors Fueling BESS Development

Several key trends are driving the accelerated growth of the BESS market:

• Decentralized Renewables and Supply Volatility: The proliferation of variable renewable energy sources, such as solar and wind power, leads to increased supply volatility. This, combined with a shift in generation from large, centralized transmission grids to localized distribution networks and “behind-the-meter” (BTM) installations, creates complex local balancing challenges.
• Electrification of Everything: The ongoing “electrification of everything”—from electric vehicles and heating systems to industrial processes—is significantly increasing demand variability. This exacerbates existing balancing challenges and can lead to lower supply utilization, thereby reducing overall grid efficiency.
• Grid Congestion and Aging Infrastructure: Investments in expanding and upgrading electricity grids have not kept pace with the rapid growth of renewables. This, coupled with aging existing infrastructure, results in increasing grid congestion and a growing need for modernization and replacement.

BESS plays a crucial role in this evolving energy ecosystem. These systems are vital for stabilizing the grid by smoothing out the intermittent nature of renewables, managing peak demand and preventing transmission bottlenecks.

Figure 1: Power generation is shifting to distribution and behind-the-meter

Source(s): New Energy Outlook Grids 2024 – BloombergNEF
Note(s): 1) In BloombergNEF’s Net Zero Scenario

Market Segmentation: Front-of-the-Meter (FTM) and Behind-the-Meter (BTM)

BESS solutions are deployed across a wide array of applications, broadly categorized into two main segments:

• Front-of-the-Meter (FTM): These are typically large-scale installations connected directly to the utility grid. They are primarily utilized by grid operators for services such as frequency regulation, grid stability, wholesale energy market participation and capacity firming for renewable projects. Utility-scale deployments fall into this category.
• Behind-the-Meter (BTM): These systems are installed on the customer’s side of the electricity meter and serve residential and commercial & industrial (C&I) facilities. BTM applications focus on optimizing on-site energy consumption, reducing electricity bills through load shifting and peak shaving, providing backup power and maximizing the self-consumption of on-site renewable generation, such as solar PV.

Figure 2: BESS segment overview

Rapid Growth in the European BESS Sector

The European BESS market is experiencing a period of rapid expansion. Projections indicate that Europe’s battery energy storage capacity is set to increase fourfold by 2029. This impressive growth is underpinned by a combination of factors specific to different application segments:

• FTM Growth Drivers: For utility-scale applications, key growth enablers include managing wholesale market price volatility, enhancing the cost-competitiveness of renewable energy sources (particularly when paired with solar PV), and the increasing demand for grid-scale energy flexibility.
• BTM Growth Drivers: The commercial & industrial (C&I) and residential BTM segments are propelled by declining battery technology costs, the congestion limiting grid connections, high retail electricity prices and increasingly supportive regulatory and policy frameworks.

Figure 3: European BESS market outlook (cumulative GWh deployed)

Source: European Market Outlook for Battery Storage 2025-2029, SolarPower Europe

Attractive Investment Case for Private Equity and Value-Add Infrastructure

FTM BESS remains a highly attractive segment particularly for the core plus infrastructure space. Having said so, Lincoln sees attractive investment opportunities emerging in the BTM BESS segment with the potential to deliver superior returns.

• Compelling Economic Proposition for Customers: BTM BESS solutions offer a robust value proposition that can be easily marketed by highlighting the system’s ROI through price arbitrage.
• Enhanced Value Beyond Price Arbitrage: While residential customers primarily focus on electricity bill savings through price arbitrage and solar PV self-consumption, B2B customers in the C&I segment can unlock additional significant value. This includes achieving earlier grid connection through lower capacity requirements and securing reliable backup power to ensure critical business operations maintain uptime in case of power outages.
• Customization and Proprietary Technology: BTM BESS providers typically specialize in smaller-scale installations, often integrated with proprietary battery management software (BMS) and energy management systems (EMS). This level of customization and technological integration insulates these providers from direct competition from battery cell OEMs.
• Attractive and Evolving Revenue Models: A significant trend in the C&I segment is the shift from a pure system sales model to “BESS-as-a-service” offerings. This transition unlocks recurring revenue streams for investors. Crucially, these revenues models eliminate the substantial upfront capital expenditure for customers, making energy storage solutions accessible to a broader market, including small and medium-sized enterprises (SMEs).
• Platform for System Integration and Microgrids: BESS installations serve as an ideal foundation for expanding energy service offerings. These systems can be readily “upsold” with complementary technologies such as solar PV, electric vehicle charging infrastructure. Furthermore, for C&I customers, a BESS can act as the central nervous system for a fully integrated microgrid solution, encompassing various hardware components and advanced energy management software, creating a comprehensive and resilient energy ecosystem for the customer.

In summary, the BESS market represents a high-growth, dynamic sector for private equity investors with a compelling combination of strong customer value, recurring revenue potential, and opportunities for synergistic growth within the broader energy transition.

Conclusion & Outlook

Lincoln is proud to serve as an active advisor for companies and sponsors navigating the exciting energy transition, and our team has completed more than 60 energy transition, power and infrastructure transactions in the last three years—including 24 in 2025 alone. Lincoln International’s deep sector knowledge and global reach enable energy clients to achieve their business positioning goals while receiving optimal transaction outcomes. As energy systems evolve toward volatility and decentralization, storage is no longer a complementary asset — it is becoming foundational.