Eku Energy's Elias Saba discusses why he believes the CIS has not fundamentally changed the company's investment approach.
Why it matters: Stop waiting for the 'perfect' BESS subsidy—if the merchant spread doesn't make the math work, a government floor won't save your long-term ROI.
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The Subsidy Trap
In the European solar and storage scene, we are currently obsessed with 'de-risking.' From Italy’s MACSE to the UK’s Cap and Floor models, developers are sitting on their hands waiting for government handouts to make the IRR look pretty. But look at Eku Energy (the Macquarie-backed heavyweight) in Australia. Their take on the Capacity Investment Scheme (CIS) is a cold shower for anyone expecting subsidies to do the heavy lifting. If a 6GW tender program doesn't change your investment approach, it’s because you’ve already figured out that the merchant market is the real prize.
Volatility is the Product
Saba’s point is subtle but lethal: if you build a project purely to satisfy a tender’s requirements, you often sacrifice the flexibility needed to capture real-world volatility. In Iberia, we’re seeing a similar dynamic. Solar cannibalization is driving midday prices to zero (or negative), while the evening ramp is a goldmine. A BESS project designed to hit a specific 'government floor' might not be optimized for the aggressive 2-hour or 4-hour cycling required to actually balance a grid like Portugal’s or Germany’s. You end up with a 'safe' asset that underperforms the market.
The European Mirror
We need to stop viewing the EU’s Electricity Market Design (EMD) updates as a signal to wait for safety nets. In the time it takes for a national regulator to design, announce, and adjudicate a storage tender, the market spread has already moved. Smart money in the EU is moving now, leveraging high ancillary service prices (FCR/aFRR) rather than waiting for a CIS-style revenue floor. If you’re building your business model around winning a government tender, you’re not a developer; you’re a bureaucrat with a hard hat. The real margin is in the spread, not the subsidy.