← Back to the entry point (all 19 questions)

What falls is the unit price. The mix of earnings shifts from balancing to seats and arbitrage, and volume grows.

"Battery earnings will thin out" has no answer until you separate which component is being discussed. Earnings are made of three components.

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① Balancing unit price (¥/kW per 30 min)Falling② Trading spread (¥/kWh)Moves year to year③ Seat fee (¥/kW per year)Rising¥19.51¥15¥10¥7.21?Japan's price ceilingMarch 2026 → September → next stepJapan cut the ceiling firstNarrows in sunny years and years when batteries jumpWidens as solar growsSpread from storing cheap and selling dear (conceptual)$292024/25$2702025/26$3292026/27PJM seat fee (per MW per day)Elevenfold across three auctionsData centres eat the seats
Fig. 1 — Earnings are made of three components. ① The balancing unit price falls with regulation and competition (Japan's stepped price ceiling). ② The spread from storing cheap and selling dear widens as solar grows, and moves year to year with weather and battery volume. ③ The seat fee (capacity) rises with growing demand and thermal exit (PJM).

① The balancing unit price falls — but Japan cut it first

Abroad, balancing prices fell as batteries grew. In its report for January–March 2025, Australia's system operator AEMO attributes a A$13.9m year-on-year fall in balancing (FCAS) revenue to more batteries increasing the supply of balancing power and lowering prices. Over the same period arbitrage revenue rose, and arbitrage came to account for 88% of battery revenue. The mix moved. Japan's order was the reverse: with batteries at 0.4% of peak demand, the state cut the ceiling first, from ¥19.51 to ¥15 to ¥10 (48-14). In Japan, the fall in unit price began first. The next step (¥7.21) remains, conditional on competition failing to improve.

② Arbitrage widens as solar grows

The spread from storing cheap at midday and selling dear in the evening widens as solar grows. In Kyushu there are days when midday solar exceeds demand by close to 50% and is curtailed (48-7), and Tokyo began curtailing in March 2026. Arbitrage moves year to year with weather and battery volume. In Britain, after the transmission operator reformed how it uses batteries for within-day balancing, the rate at which batteries were skipped over for instructions fell from 43% in January 2025 to 32% in December, and revenue from within-day balancing (the Balancing Mechanism) recovered (NESO, Modo Energy). The better the mechanism, the more often batteries receive instructions. Japan, too, plans to move to a simultaneous market determining wholesale and balancing together, targeted for the early 2030s (47-4).

③ Seat fees rise

PJM's seat price rose from $28.92 to $333.44 across three auctions, with the three from 2026/27 onward all pinned to the cap (48-10). The reason is data-centre demand. In Japan too, demand has turned upward (48-12) and thermal is declining. The price of a seat that can definitely deliver in the evening is heading up. Japanese capacity-market prices have not moved as PJM's have, however.

The total depends on the market. But cells get cheaper, and volume grows

The sum of the three components depends on the market, and it has moved up and down year to year abroad as well. Meanwhile, battery pack prices fell from $144/kWh in 2023 to $108 in 2025, and stationary applications came in at $70/kWh — down 45% year on year and the cheapest of all applications (BloombergNEF). Total storage-plant construction cost has not fallen as far (system prices were down 31% year on year, and Japanese prices need to be looked at separately), but the direction is down. And volumes abroad kept growing even after unit prices fell. In Australia, 4,445 MW came online in the year from January–March 2025, more than doubling installed capacity (AEMO). Japan is at 0.4%. The room to grow lies in volume. But the more volume grows, the more the balancing unit price falls. That is what happened abroad.

How an investor should read this
What falls is the balancing unit price, and in Japan that fall started first. What determines total earnings is ① seat fees, ② the areas and hours where arbitrage is large, and ③ how fixed revenue (tolling, capacity market) is assembled. Stationary battery prices are falling (BloombergNEF). But most of a storage plant's cost sits outside the cells, and Japanese prices need to be looked at separately. Abroad, batteries kept growing after unit prices fell. Japan sits just before that, at the entrance to the phase where volume grows.
The questions in this series
I. Why the grid ran without batteries in the past
  1. 48-2The grid used to run fine without batteries, didn't it?
  2. 48-3What disappears from a grid with fewer spinning machines?
  3. 48-4Why "ten seconds"?
  4. 48-5Does more renewables mean more balancing power is needed?
II. Why thermal, nuclear and pumped storage are not enough
  1. 48-6Can't thermal just do the balancing?
  2. 48-7If nuclear grows, do we stop needing batteries?
  3. 48-8Wouldn't more pumped storage be enough?
  4. 48-9Where does the balancing power that the market failed to buy come from?
III. Where demand and the generation mix are heading
  1. 48-10Why do data centres point to batteries?
  2. 48-11What happens to solar from here?
  3. 48-12Thermal volume, nuclear operation, demand — what next?
  4. 48-13How much battery capacity is actually coming?
IV. The money, and what the state really wants
  1. 48-14Does the government actually want more batteries?
  2. 48-15What does battery storage resemble as an infrastructure investment?
  3. 48-16They say the earnings will thin out. Is that true? (this article)
  4. 48-17Can you copy the overseas playbook and make money in Japan?
  5. 48-18How much battery storage will Japan ultimately need?
  6. 48-19Is a battery the same wherever you put it?
The one question beyond the 1848-20 What do you pay, and what comes back?The answer differs by project, so we have built a calculator whose dials are made only from published figures. You can move unit price, clearing rate, seat fee, arbitrage spread and construction cost yourself.

Sources

Supervised by
Shinya Nakashima(Representative Director, Science X Inc.; Ph.D. in Engineering)

Works on the development, sale and technical due diligence of grid-scale battery storage plants. This column is written and supervised on the basis of hands-on transaction and evaluation practice.