BESS Revenue Models Explained: Tolling, Floor Pricing & Fully Merchant

The German electricity market is volatile and dynamic: prices fluctuate daily, regulatory frameworks change, and revenue streams are difficult to predict. That is exactly why it is important for anyone investing in or operating Battery Energy Storage Systems (BESS) to understand the different revenue models available, including their risks and revenue opportunities.

The choice of the right revenue model is a key factor in determining

• whether a project is bankable,
• what return expectations are realistic,
• and how stable revenues will be over the asset’s lifetime.

Three main BESS revenue models have emerged so far: Fully Merchant, Floor Pricing, and Tolling. They differ primarily in how much exposure operators have to market fluctuations and how much revenue certainty a contract provides.

In this article, we explain these revenue models, their risk profiles, their revenue structures, and their suitability for different types of investors. You will also learn why we decided to launch our own tolling offering.

The fully merchant model (also known as a revenue-share or profit-share agreement) is the most market-exposed of the three models. Revenues generated from commercializing battery flexibility are split between the asset owner and the battery optimizer according to a pre-agreed ratio. There is no minimum guaranteed payment. Asset owner and optimizer decide in which markets the battery storage system will be traded, and the optimizer typically takes over operational dispatch.

Under this revenue model, the BESS is exposed to both the full downside and the full upside potential. In other words, it fully benefits from favorable market conditions, but it is also fully exposed to the risk of declining revenues.

As the asset owner bears the greater risk in this model, their proportional revenue share is correspondingly higher — given current forecasts and markets developing positively beyond that — than in other models.

Example: Annual Revenues Under the Fully Merchant Model (95:5 split)

The fully merchant revenue model can potentially deliver the highest returns, but it is also the most dependent on market fluctuations and therefore difficult for many banks or conservative investors to finance. It is suitable for maximizing profits and makes sense when no additional financing security is required.

Floor pricing is a middle ground between full market risk and contractual protection. In this model, storage operators receive a guaranteed minimum amount (the floor price), while any additional revenues above this threshold are shared between the operator and the optimizer. This preserves part of the upside potential while limiting downside risk.

Because the asset owner retains the upside potential while the optimizer bears the main risk, the floor price is typically lower than what could be achieved under a tolling agreement.

The floor amount is calculated based on monthly market results and can, for example, be linked to forecast spreads in the day-ahead market. Daily amounts are aggregated and settled at the end of the month. A static floor, agreed for a fixed term, is also possible. Some floor pricing models include a cap that limits upside potential to a specified amount.

Example: Annual Revenues Under the Floor Pricing Model (guaranteed floor: €80,000/MW, revenue share above floor: 75% operator/25% optimizer)

This model is ideal for investors who prefer lower volatility and a certain level of protection against revenue declines, but who do not want to give up additional market opportunities entirely.

It offers more flexibility than pure tolling while also being more attractive for debt financing than a fully market-based model. However, floor pricing is not entirely risk-free: a project’s bankability depends heavily on the specific floor price agreed upon.

Under the tolling model, the asset owner enters into a contract with an offtaker. The asset owner receives a pre-agreed payment (the tolling fee), which is independent of the offtaker’s actual market revenues.

This means that both the commercial risk and decision-making authority over commercialization are fully transferred to the offtaker. The asset owner remains responsible for technology and administration and must guarantee the system’s availability.

Tolling comes in two variants:

• Full Tolling fully secures revenues.
• Partial Tolling is a hybrid solution, comparable to the floor pricing model: a defined share of revenues is fixed and secured, while the remainder remains market-dependent. This gives partial tolling additional upside potential while still offering minimum protection.

Example: Annual Revenues Under a Full Tolling Model (tolling fee: €130,000, 5 year term)

Tolling is the model most strongly focused on revenue stability. It is best suited for operators seeking a high degree of planning certainty and reliable income. Tolling is also attractive to investors from the renewable energy and infrastructure sectors who prefer predictable, low-risk investments, as well as for project developers with high debt financing requirements or for whom bankability plays a central role.

According to Aurora Energy Research, the German BESS market is currently considered the most attractive in Europe. However, as competition increases, revenue volatility also rises. At the same time, growing curtailment, operational restrictions imposed by grid operators (FCAs), and an uncertain regulatory environment mean that investors and operators must assess their projects in a more differentiated way.

This is why tolling agreements are becoming increasingly relevant, especially for capital-intensive projects. Traditional banks and infrastructure investors are accustomed to predictable, low-risk investments and therefore require contractual models under which at least part of the revenue is secured. Tolling meets this requirement: it creates stable, financeable revenue streams and gives lenders the confidence they need to make financing decisions.

That is also why we at The Mobility House Energy, in partnership with the Electrohold Group, have developed a bankable tolling offering specifically tailored to the requirements of the German BESS market. Our aim is to reduce market price risk and support project financing.

The Three BESS Revenue Models Compared

There is no universally “right” BESS revenue model. The ideal choice depends on an individual balancing of revenue expectations and risk appetite:

• Those willing to fully bear market fluctuations and who do not require additional financing security can achieve the highest revenue potential with a fully merchant model.
• Those looking for a middle ground will find floor pricing to be a flexible combination of minimum protection and market participation.
• Those who prioritize stable, predictable income, bankability, and full risk mitigation are best advised to choose a tolling model.

Especially in a market as dynamic and attractive as Germany’s, this trade-off is becoming ever more important. The right revenue model is therefore not just a commercial decision, but a strategic foundation for the realization and financing of battery storage projects.