Podcast Summary: What Makes a BESS Project Bankable in Germany? – Transmission, Modo Energy

Host: Ed Porter (Modo Energy)
Guest: Florian Hoch (Coordinator of Nord/LB’s battery storage financing across Europe)
Date: March 12, 2026

Episode Overview

This episode explores the realities of making Battery Energy Storage System (BESS) projects bankable in Germany. Host Ed Porter sits down with Florian Hoch of Nord/LB to unpack the financial, regulatory, and contracting hurdles facing battery storage developers, and to highlight the nuanced process banks undertake to support these projects. Listeners are taken deep inside the machinery of project financing in a fast-evolving energy market, with practical lessons for developers and investors in Germany and across Europe.

Key Discussion Points & Insights

1. What Makes a Project Bankable?

• Bankability isn’t about banks “writing checks on tap,” but about building confidence in the viability and stability of a project’s financial and regulatory underpinnings (01:38).
• Experienced developers focus on small scale projects first, growing their expertise through permitting, building, and operating before seeking larger sums of capital (03:02).
• Quote (Florian Hoch, 01:38):
  “I think most people think somehow that banks are just there to provide money on tap... but what we're actually doing… goes into many dead ends over many months, into very wrong streets... but it will lead out to something that is then financeable and doable.”

2. Financial Hurdles: The Role of Experience, Not Just Capital

• Success depends on the story and operational experience behind a project, not just access to money (03:02).
• Germany is unique in offering real operational learning opportunities, making it an attractive arena for UK or international investors aiming to scale their expertise.

3. Regulatory Hurdles: In Flux and Fragmented

• The German regulatory environment is rapidly evolving and complex—particularly around building permits and grid connection (05:12).
  • Multiple, shifting pathways to permits.
  • Recent swings in "privileged" status for BESS projects.
  • Variations by region (e.g., Bavaria’s relaxed approach).
• The legislation for grid connections is based on laws designed for large-scale power plants, not BESS, causing uncertainty until dedicated codes are developed.
• Quote (Florian Hoch, 05:12):
  “The problem is not that the process in itself is complex, it's that it's still under development... you had one of four or five pathways.”

4. Defining Bankability & The Importance of Clarity

• Bankability = regulatory certainty and clarity in permitting, grid, offtake, and project structure (07:55).
• Quote (Florian Hoch, 08:21):
  “Most important: clarity. You can work through difficult processes; as long as you have clarity of what you’re facing, a project can become bankable.”

5. Regulatory Risks to Revenue and Opex

• Banks care deeply about regulatory changes impacting revenues (e.g., introduction/discontinuation of grid services, or products like a capacity market) or operating costs (09:08).
• The possibility of sudden regulatory change—especially around grid fees and grandfathering (exemptions for existing projects)—is a major risk.
• Grandfathering explained (13:57):
  “If a regulatory change comes up after people have made that final investment decision, [grandfathering] unwinds the impact for those people, giving them confidence to invest.”
• Retroactive changes have historically damaged investor trust and increased project costs (14:21).

6. Grid Fees as a Dynamic Tool, But Uncertainty Remains

• Discussions about grid fees for BESS projects in Germany are ongoing, with the threat of ending exemptions and lack of clarity on future fees (15:22).
• Grid fees can be a useful tool to signal investment in grid-constrained areas.
• Both host and guest agree: the issue is not with grid fees per se, but with the unpredictability about their size, structure, and timing (16:43).
• Quote (F. Hoch, 16:43): “No one knows how [grid fees] would be set up in terms of the fee structure, and no one can quantify the size or the amount of the fee. I think this is more the problem.”

7. Contracting & Revenue Models: The Evolution

• Banks would love 10-year, fixed, guaranteed revenue contracts, but reality requires more nuanced solutions (19:22):
  • Offtake 1.0: Pure route-to-market optimization.
  • Offtake 2.0: Partial/floor fixed agreements—the current German standard.
  • Offtake 3.0: Disentangling creditworthiness (from, e.g., investment banks) from trading capability (optimizers), enabling more flexibility (21:48).
  • Offtake 4.0: Isolating one piece of the revenue stack (e.g., day-ahead market) and fixing/switching just that segment.
• The UK leads on innovation, Germany currently provides higher value (e.g., €100–120k/MW/yr for two-hour assets, 5–10 years).
• Quote (Florian Hoch, 24:31): “Germany clearly leads on value at the moment. I’m not saying it will forever... The UK has always been at the forefront of developing the product.”

8. Market Saturation Is Real—Don’t Bank on Ancillary Services

• Revenue from frequency response and similar services can decline rapidly once capacity saturates (25:26).
• Professional developers should model these as upside, not as baseline.
• Lending and contracts focus more on wholesale/trading components of revenue (26:50).

9. How Much Must Be Contracted for Bankability?

• No set percentage—banks use a “thinking framework” (28:08):
  • Assess theoretical debt size using contracted vs. merchant revenue.
  • Merchant risk controls: basic breakeven price, debt outstanding after contract expiry.
  • Repayment structure: ensure incentives and appropriate risk-sharing between equity and lenders (e.g., to avoid all upside going to equity early).
• Typical German structures: 5–7 year tolling, 80% capacity contracted, loans sized for full warranty period (~14 years).
• Quote (F. Hoch, 28:08): “Banks finance for the length of the warranty period... and you get a tolling agreement for seven years, five years. So only 50% of the time is really contracted. There’s a lot of merchant still in these structures.”

10. The Bank’s Role Beyond Capital

• Banks increasingly share expertise from renewable/PPA background, helping structure the first bankable tolling agreements in Germany (33:50).
• This means working with clients throughout structuring, networking with offtakers and advisors, not just providing cash.
• Quote (F. Hoch, 35:38): “We almost got like first hand training in how we should set up offtake structures that are bankable and that are sustainably bankable…”

11. Grid Connection Clarity and Flexible Agreements

• Certainty of grid connection timing and capacity is critical (37:05):
  • As long as timing is clear, a delayed connection (e.g., 2 years out) is bankable, though perhaps not efficient.
  • Uncertainty or slippage kills projects.
• The rise of “flexible connection agreements” (TSOs imposing operating restrictions) creates more complexity—bankability depends on quantifying downsides (38:11).

12. German vs. UK Market: Lessons Learned

• Three key “UK lessons” for German developers (40:29):
  1. Augmentation (expandability) is a major upside—either by installing larger batteries or securing more land.
  2. Saturation will happen—don’t rely on ancillary services.
  3. Regulation always changes—dedicate resources to stay abreast of developments.
• Mini-perms are common; projects are refinanced/augmented/adjusted after initial contract period (42:06).

13. If in Charge Tomorrow: The One Policy Change

• Clarity above all: Set clear timelines for every process—grid, permits, contracting—executed in legislation or regulatory rules (43:39).
• Quote (F. Hoch, 43:39): “If I have only one change, I would try to create clarity by giving clear timelines on every single aspect that affects my project.”

Notable Quotes & Memorable Moments

• On bankability:
  “You can work through difficult processes; as long as you have clarity of what you’re facing, a project can become bankable.” (F. Hoch, 08:21)
• On grid fee risk:
  “The worst that can happen for bankability: you believe in grandfathering, and then suddenly a legislation change says, ‘yeah, actually that's not really true.’” (F. Hoch, 13:57)
• On the role of banks:
  “We think if you think a bit bankability when you set up an offtake structure, you really can create good projects.” (F. Hoch, 35:38)
• Clarity as the golden rule:
  “If I have only one change, I would try to create clarity by giving clear timelines on every single aspect that affects my project.” (F. Hoch, 43:39)

Timestamps for Key Topics

• [01:38] — What most get wrong about bank financing for BESS
• [03:02] — Financial hurdles: experience over capital
• [05:12] — Regulatory hurdles: permits, grid codes
• [07:55] — What is bankability?
• [09:08] — Regulatory risks to revenues/opex for BESS
• [13:57] — Grandfathering explained and its risks
• [15:22] — Grid fee uncertainty and market signaling
• [19:22] — Revenue models: Offtake 1.0 to 4.0
• [24:31] — Germany vs. UK: value and revenue stack
• [25:26] — Market saturation and ancillary services
• [28:08] — The “magic number” for bankability: a framework, not a threshold
• [33:50] — Banks’ role beyond just lending
• [37:05] — Grid connection delays and flexible connections
• [40:29] — Lessons from the UK: augmentation, saturation, regulation
• [43:39] — The one systemic fix for Europe's power markets: clarity and timelines

Conclusion

This episode gives an unusually practical look at what it takes to make BESS projects “bankable” in Germany, covering everything from the importance of operational experience, the need for regulatory clarity, the ever-changing nature of contracts and revenues, and the bank’s evolving role as both financier and advisor. The big takeaway? Success relies on clarity and adaptability—bankability is not ticking a box, but consistently navigating uncertainty with the right processes, partners, and mindset.