Given the scarcity of network capacities, integrating the growing volume of weather-dependent generation and energy storage systems into the grid is becoming an increasing challenge in the domestic electricity sector. The emergence of co-location models offers new opportunities for market participants, while also raising numerous legal and financing questions. Gábor Simon, head of the energy practice at DLA Piper Hungary, summarizes the key trends, regulatory frameworks, and open issues.
Co-location typically refers to pairing renewable energy-based (such as solar or wind) electricity generation with battery energy storage systems (BESS) at the same site, using a shared grid connection point, physically implemented through the joint use of the production line. Although co-location as a technical solution and investment form has already appeared on the market, many legal and business issues remain unresolved.
In recent years, a significant number of weather-dependent generation projects were implemented in Hungary, mainly solar power plants, which present serious challenges to maintaining the balance of the electricity system. Due to network scarcity, new feed-in rights can only be obtained through periodically announced capacity allocation procedures. This situation has prompted market participants – not only in Hungary but also in Western Europe – to seek new solutions for grid access. One such approach is sharing an existing grid connection point, allowing another project to be added and utilizing capacity that is not currently used by weather-dependent generation.
Benefits and market trends
When PV and BESS belong to the same ownership group, co-location offers the advantage of balancing weather-dependent generation by integrating storage and provides an additional revenue stream for the investor. In cases where PV and BESS are under different ownership, besides cost-efficiency benefits, significant risks may arise for the newly (secondarily) connected project if the original holder of grid connection rights loses those rights for any reason.
According to Pexapark’s analysis, co-location agreements are gaining popularity in Europe: since early 2025, the “BESS Deal Tracker” has recorded 22 co-location transactions in European markets (all PV + BESS), representing 3 GWh of storage capacity. Although this still falls short of the approximately 14.4 GWh of contracts concluded for standalone BESS projects during the same period, the growth trajectory is remarkable: a 676% increase compared to 2024, surpassing the 392% growth of standalone BESS investments.
Regulatory and technical framework
Co-location can create synergies: specific development, permitting, and construction costs are reduced, while operational costs can also be shared between projects. With properly coordinated PV and BESS operations, system usage fees can be optimized, further improving project returns.
Recently, the concept of agreements for shared use of production lines and connection points were introduced to Hungarian regulations, which is relevant for co-located projects under different ownership. The development of a model contract is currently underway through industry collaboration.
Open questions and challenges, international practices
Key issues in the co-location model agreement include the sharing and pricing of the capacity of production lines and connection points, the rights and obligations of secondary users, and managing financing risks if the primary user loses its right to feed into the public grid. If lawmakers are open to addressing these concerns, future regulations, based on industry proposals, may be created, which could facilitate the co-location of PV and BESS systems under different ownership in Hungary.
To mitigate risks for secondary parties connecting to existing network elements (and external financiers), the solution applied in the United Kingdom is that the participants in the co-location project – such as a renewable power plant and an energy storage facility – jointly establish a so-called GridCo company, into which company the ownership of the production lines, related grid elements, and rights to use the connection point are transferred.
The most important detail of the model is that the joint GridCo owns the assets and rights ensuring access to the public grid. Thus, if one project fails (e.g., ceases operation or becomes insolvent), the other project retains access to capacity and can continue operating. This model provides higher legal and financial predictability and reduces financing risks, as grid access does not depend on the survival of a single project. The main question regarding the GridCo model is under what conditions the hosting party is willing to transfer the significant business-value grid infrastructure and feed-in capacities into joint ownership.
Conclusion
The legal, business, and technical frameworks for co-location are evolving, but many open questions remain that must be resolved to enable further adoption and bankability of co-located projects. Broad industry collaboration and legislative support will be key in the coming period.
Author: Gábor Simon
Gábor Simon
Head of Energy and Procurement
Gábor Simon
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