2025 was a year of intense activity in Europe’s BESS merchant optimization space. Pexapark’s BESS Deal Tracker recorded nearly 5.5 GW of purely merchant agreements. Great Britain, where activity shifted decisively toward fixed-payment Flexibility Purchase Agreements (FPAs), accounted for just 13% of this volume.
The bulk of merchant activity occurred in EU markets, where saturation has yet to materially erode revenues and asset owners have continued to favor merchant arrangements. Projects in continental European markets are also typically smaller than in GB, which supports more equity-heavy capital structures and a greater reliance on riskier merchant strategies targeting short-term higher IRRs. At the same time, the availability of BESS project debt remains more limited across EU markets due to a shallower operational track record compared to GB.
“Algo-traders” – highly specialized, nimble firms providing advanced algorithmic trading and dispatch capabilities – led merchant optimization activity in EU markets. Three players stood out in terms of market share last year: Entrix, Enspired, and Capalo AI. Together, they announced 2.5 GW of third-party standalone BESS merchant optimization contracts, accounting for 75% of the total.
However, algo-traders are not the only players trading and dispatching BESS on a fully merchant basis. Utilities such as Axpo, Engie, and Eneco also offer optimization agreements, typically structured over longer tenors. Last year, Eneco pioneered index-based merchant arrangements in the Dutch and Belgian markets, under which the optimizer is compensated through an index-linked service fee, rather than a share of realized merchant revenues. The deployment of such models by experienced utilities with sophisticated trading desks is expected to put pressure on smaller algo-traders in 2026.
Limited balance sheet capacity typically constrains algorithmic traders’ ability to underwrite fixed-payment structures. In response, the most sophisticated players are increasingly collaborating with investment-grade counterparties, such as utilities and commodity traders, to gain a foothold in the FPA market. In 2026, algo-traders will compete not only for first-mover advantages across markets and market share, but also for access to reliable, creditworthy partners.
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