Germany To Launch Inertia Service Market In 2026 – New Revenue Stream For Grid-Forming BESS

Germany is preparing to introduce a new long-term ancillary services market for inertia – a structural step toward securing grid stability in an energy system increasingly dominated by inverter-based renewables. From January 2026, the four German transmission system operators ("TSOs") will begin procuring inertia services under a fixed-price remuneration model, opening a new revenue stream for battery energy storage systems ("BESS") that are certified as "grid-forming".

The scheme, initiated by the Federal Network Agency ("BNetzA") in its ruling from April 2025 (BK6-23-010) and recently detailed by the TSOs, is expected to complement Germany's broader strategy to manage system inertia as conventional synchronous generators retire and the share of variable renewables continues to rise.

What is inertia – and why does it matter?

Inertia refers to the immediate, automatic response of the power system to frequency disturbances. It slows down rapid frequency changes before conventional primary control (e.g. FCR) can respond. In systems where large rotating generators are phased out in favour of solar PV, wind, and BESS – all of which are inverter-based – inertia must be actively procured to avoid steep and sudden frequency deviations.

Germany's TSOs will now compensate resources such as BESS for providing synthetic inertia, subject to specific technical and certification criteria.

Market design and contract structure

Under the new regime, BESS and other eligible technologies will be able to enter into contracts with TSOs for periods ranging from two to ten years. Remuneration will follow a fixed-price model, with the first price sheet expected to be published by 28 January 2026. This price will remain valid for an initial period of two years, after which new price levels will be set by the TSOs, taking into account regional needs, technological developments, and broader system requirements. Prices will also include a degression component to incentivise early participation.

Four product categories will be offered, distinguished by the direction of the inertia response (positive or negative) and the level of availability (base product at 30 percent availability and premium product at 90 percent availability). BESS operators are expected to favour the premium product, given its higher remuneration and better alignment with the technical capabilities of battery systems.

Prospective participants will submit an offer to the relevant TSO. Unless the offer is rejected or additional information is requested within three months, it will be deemed accepted. Service delivery must begin within three years of acceptance.

Technical and certification requirements

To qualify, systems must meet the VDE FNN technical requirements for grid-forming inverters, which have already been published. These standards set out the minimum functional specifications for assets capable of delivering synthetic inertia, including criteria on response time, system stability, and frequency support. Certification of the inertia capability will be required and must remain valid throughout the duration of the contract. During service provision, participating systems will need to demonstrate operational availability through synchronisation data provided retrospectively at 15-minute intervals.

Payments will be made on an annual basis and will depend on verified availability. Systems that exceed the minimum availability threshold, particularly those achieving more than 90 percent uptime, will benefit from higher payments. Conversely, systems falling short of their contractual availability commitments may not be remunerated.

Implications for BESS developers and investors

The new inertia service market offers a compelling opportunity for BESS projects in Germany to diversify their revenue stack. In addition to participating in the frequency containment reserve (FCR) market and engaging in wholesale arbitrage, BESS with certified grid-forming capabilities will be able to access a further long-term contract-based income stream. This added visibility may improve the bankability of projects, although the actual investment case will ultimately depend on the pricing details yet to be published.

The inclusion of grid-forming capabilities may lead to higher capital expenditure and technical complexity. Developers currently designing or constructing storage assets in Germany will therefore need to carefully assess how to future-proof their systems for inertia market participation.

Outlook

The introduction of a dedicated inertia procurement scheme is a pivotal step in aligning system stability services with the realities of a renewable-based power system. While key details – particularly pricing – remain to be finalised, the direction of travel is clear: grid-forming capability is becoming a de facto requirement for BESS in Germany, and early movers may be well positioned to benefit from an emerging long-term revenue stream.

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