Co-location – where renewable generation is paired with technologies such as battery storage at the same site, typically sharing a single grid connection – is increasingly being deployed across Europe’s power markets.

According to analysis from Aurora Energy Research, Germany leads the ranking due to its market size and stronger potential returns compared with standalone renewables projects.

The UK’s position is supported by its significant installed capacity and a project pipeline backed by contracts for difference (CfD), which help offset ongoing grid connection delays. Bulgaria, which shares second place, benefits from strong subsidies, a robust development pipeline and favourable project economics.

The report also highlights Spain, Hungary and France as key markets to watch, citing regulatory changes and reforms.

Sameer Hussain, Senior Research Analyst, Aurora Energy Research, said: ‘As renewable penetration accelerates, grid congestion, curtailment and price volatility are becoming defining features of Europe’s power markets. Co-location is no longer a niche solution: it is increasingly critical to protecting project economics and sustaining investment momentum.’

Across Europe, co-located renewable capacity reached 6.3 GW in 2025, led by solar-plus-storage projects accounting for more than 60% of deployments. While maturity varies widely, Aurora expects a significant volume of new capacity to come online within five years. Spain, the UK and Germany lead in total capacity, while smaller markets such as Bulgaria and Romania stand out relative to their size, with co-located solar exceeding 40% of installed photovoltaic capacity.

Grid access remains a central challenge. Over 1,600 GW of renewable and storage capacity is awaiting grid connection across Europe, including around 550 GW in the UK alone. In markets such as the Netherlands, Greece and Hungary, co-location can improve grid access or reduce costs. High grid charges in regions such as Ireland and the Netherlands are also strengthening the case for combining storage with renewables, the study finds.

Market pressures are also intensifying. Negative price hours surged in 2025, with Spain, the Netherlands and Germany exceeding 500 hours. Capture price cannibalisation is expected to deepen, particularly for solar in Iberia, where discounts could approach 50% by 2030, and for onshore wind in Germany, where they may exceed 25%. Curtailment across key markets is forecast to increase from more than 10 TWh in 2024 to around 33 TWh by 2030.

At the same time, battery revenues are projected to fall by around 20% by 2040 as markets become more saturated. Co-located storage is seen as a way to mitigate these risks by shifting generation, reducing curtailment and improving capture prices.

Subsidies continue to dominate as the main route to market, although hybrid power purchase agreements (PPAs) – integrating renewables and energy storage systems under a single contract – are gaining traction. Two sided CfDs that allow co-location remain central in several countries, including the UK, France, Romania and Estonia. Additional targeted support is available in markets such as Bulgaria, Greece and Germany, alongside growing capital expenditure support for co located battery projects.

Rebecca McManus, Research Lead, Aurora Energy Research, said the hybrid PPA market, while still at an early stage, gathered pace in 2025 with more than 700 MW contracted. ‘This growth points to rising confidence among both corporate offtakers and generators in co-located and hybrid asset structures,’ she said.

Although still nascent, hybrid PPAs are beginning to emerge across Iberia, France, the UK and Bulgaria. Spain currently leads activity, but Aurora expects the greatest value uplift in France and Portugal, where hybrid and peak-shaving structures could increase contracted volumes and boost PPA capture values by up to 50% compared with pay-as-produced agreements.