Auxilium Infrastructure Partners’ perspective on BESS saturation in DK1 and DK2
Battery storage is scaling rapidly across the Nordic power system, and in Denmark’s two price zones investor concern increasingly converges on a single question: what happens when these markets saturate?
The question is directionally right but misframed. What we observe in DK1 and DK2 is not value disappearing — it is value moving. Scarcity-driven pricing is giving way to competitive equilibrium, and the resulting redistribution favors some asset configurations and penalizes others.
In the early phase of deployment, battery economics were driven by scarcity. Fast-response flexibility was limited, and Energinet’s FCR and aFRR capacity products cleared at levels that reflected that scarcity.
Batteries entered as price takers and captured high, relatively stable revenues. That regime is now closing.
The Clean Horizon Battery Storage Index provides a useful lens on this transition, but the signal should be interpreted carefully. Danish storage revenues remain highly market- and configuration-specific, and recent data points indicate increasing pressure on short-duration revenue stacks, particularly where batteries compete directly in standardized reserve products. From an operational perspective, we observe this dynamic emerging earlier in DK1, with DK2 following with a lag.
This is not saturation in the sense of a diminishing market. The market is doing what it is designed to do. Battery systems are highly replicable: similar cost structures, comparable performance, and increasingly convergent optimization strategies. As more of these assets enter standardized products, the supply curve flattens and the marginal price converges toward the cost of the marginal battery rather than legacy assets. Falling capacity prices, in this context, reflect increasing system efficiency rather than structural weakness of the asset class.
The more important shift is in system behavior. As batteries proliferate, they change how the system operates. Frequency deviations are corrected more rapidly, imbalances resolve earlier, and extreme short-duration price events become less frequent. The system becomes tighter and less volatile at high frequency, which has direct implications for revenue pools. Value linked to fast, short-duration events becomes less pronounced, while longer-duration imbalances become increasingly important.
This dynamic is particularly relevant in the Danish context. The power system is increasingly shaped by wind, producing extended periods of surplus and sustained scarcity during low production. These are not transient events; they unfold over multiple hours and, in some cases, across consecutive days. As renewable penetration increases, these dynamics intensify rather than diminish.
This is where the distinction between short- and long-duration (>3MWh) storage becomes economically material.
Short-duration batteries, typically configured around one to two hours, are structurally concentrated in fast-response ancillary services. They compete in the same products, over the same time horizons, against increasingly similar assets. This segment is therefore most exposed to standardization and price convergence. Our operational view is that assets with limited duration are increasingly setting prices in parts of the reserve stack during certain hours, reinforcing this pressure.
Longer-duration storage operates under a different economic profile. By extending the time horizon over which energy can be shifted, these assets access a broader and less saturated set of value pools: sustained balancing, intraday positioning, day-ahead arbitrage, and — increasingly relevant ahead of the Nordic region’s planned accession to the European MARI platform in 2027 — mFRR energy activation. They are aligned with the type of volatility that remains in a renewable-dominated system: multi-hour imbalances rather than second-by-second deviations.
Duration, on this view, functions as a structural differentiator rather than a technical parameter. It moves the asset into segments where substitution is lower, competition is less concentrated, and value is more closely linked to underlying system fundamentals.
For investors, the implication is evolution rather than deterioration. Value is shifting away from standardized capacity products and toward more complex, time-dependent, system-driven opportunities. In the first phase of the market, returns were largely driven by access to high-priced services. In the next phase, they will be driven by how assets are configured and operated — including how effectively a portfolio can route between markets as conditions change.
That requires a corresponding adjustment in how projects are evaluated. Single-market exposure, particularly to capacity-driven revenue streams, becomes increasingly fragile. Linear scaling assumptions become less reliable as market depth increases. Resilience comes from operating across multiple markets, capturing value across different time horizons, and adapting to changing system conditions. For AIP, this is not a future scenario; it is the framework we already apply when developing and operating assets in DK1 and DK2.
The relevant question is not whether these markets will saturate, but where in the evolving value chain a given asset is positioned — and whether its duration, configuration, and routing flexibility match where the system is heading rather than where it has been.
At Auxilium Infrastructure Partners, we continuously engage with these dynamics in both development and operations across DK1 and DK2. We are always interested in discussing our perspective with investors and partners navigating this transition.