Today, 22 January 2026, marks the launch of Germany’s market-based procurement of inertia, a first-of-a-kind market in Germany that opens an additional revenue stream for Battery Energy Storage System (BESS) equipped with grid-forming inverters. In this blog article we want to give you a short overview of what inertia is, why it is relevant and what asset owners now need to know and keep in mind.
What you need to know about inertia
What is inertia?
To maintain grid stability and avoid any blackouts, the German power system must keep frequency close to 50 Hz (± 0.2 Hz). When frequency deviates, Transmission System Operators (TSOs) activate ancillary services, such as Frequency Containment Reserve (FCR), automatic Frequency Restoration Reserve (aFRR) or manual Frequency Restoration Reserve (mFRR), to restore balance. Those controllable services, however, take time to respond.[1]
Inertia helps bridge that gap. The spinning masses in grid-synchronised turbine-generators store kinetic energy and automatically release or absorb it when frequency changes. This slows the rate of change of frequency and gives control-room actions time to take effect.[2]
What is changing?
As thermal generation assets, such as coal-fired or gas-fired power plants, retire, system inertia declines, which puts system stability at risk. The current inertia requirement is equivalent to around 30 GW of batteries by 2027 and is expected to grow further as conventional power plants come offline.[3]
To address this, TSOs are procuring technologies such as BESS with grid-forming inverters. These can simulate inertia and stabilise the grid until the Frequency Containment Reserve, the immediate, automatic response that stabilizes grid frequency after a disturbance, kicks in.
How does this new market work?
TSOs will procure inertia on a fixed-price basis which will apply to market participants providing inertia services. Remuneration is based on keeping a defined inertia MWs volume available, rather than energy delivery. This means that payment does not depend on how often or how much energy is dispatched.
As long as the agreed inertia volume is available and therefore the pre-defined power capacity isn’t dispatched in other markets for the agreed time-period, participants receive the payment at the end of the billing cycle. If an asset does not meet the minimum availability requirement for the year, payment will drop to zero. The prices published by the TSOs will be valid for offers submitted within the first fixed price period (22 January 2026 to 21 February 2028). After that, TSOs have the option to review prices for the next fixed price period.[4]
There are four products available for batteries to qualify for. Each BESS can qualify for a combination of one positive and one negative product for between 2 and 10 years. The TSOs have indicated that all qualified offers submitted in response to a procurement round will be accepted.
Outlook and key considerations for BESS owners
As the market launches, battery asset owners should consider whether they want to qualify for the inertia market. At current prices, it won’t be the main driver of returns, but it can provide a stable upside alongside existing revenues.
Key questions include:
- Is my asset eligible?
- How much inertia can I and do I want to offer with my asset?
- Do I want to lock in today’s fixed price for up to 10 years or choose a shorter term?
With the first assets starting the qualification process this week, we expect early insights to quickly shape offers and implementation approaches. We will continue to cover this topic in upcoming articles — stay tuned to stay informed.
[1] SMARD
[2] National Energy System Operator (NESO)
[3] Modo Energy
[4] Netztransparenz