Solvency II and BESS investments: No infrastructure quota, but an infrastructure template – if you understand it, you can use it

BESS investments per se have characteristics that may well fall under the Solvency II template of qualified infrastructure in individual cases:

• Predictable sources of income through long-term lease or capacity agreements with operators, grid operators or energy traders.
• Limited corporate purpose via project-related SPVs that operate exclusively storage.
• Technological planning thanks to modular systems, standardized maintenance cycles and clear performance clauses.
• Governance stability through service level agreements, insurance concepts and ESG monitoring.

Even though battery storage technology is largely standardized, funds differ according to how they are used for monetization. It is therefore not enough to simply prove that BESS investments can deliver long-term and well-hedged returns. From infrastructure funds of typically well-known operator models to very isolated risk-averse asset management approaches, the monetization of BESS investments is reflected in a broad spectrum.

This must therefore be taken into account in the subsumption. This is because, to put it very simply, the core question is whether, as a rule of the Solvency II logic, investors are protected by regulatory or contractual provisions in the use of BESS investments. And if not: Does this protection at least replace the fact that the income from the BESS plants is financed by payments from a large number of users. Different monetisation approaches in the fund may require different contractual implementation approaches in order to benefit from the reduced capital deposit. Who is the contractual partner in the individual fund construct and from which contracts does the monetization directly arise from the fund's point of view in the respective individual case, which feeds distributions and capital returns to the investors?

Even if in theory it is sufficient to prove that an investment delivers stable, long-term and well-hedged returns, in practice Solvency II requires a binding level of detail, which fund structures must first map. The distinction between project and corporate (Art. 164 a / b) requires the exact mapping of the economic purpose, the disclosure of the contract architecture and consistent cash flow forecasts at the asset level. Even small deviations – operators, variable revenue sources or mixed portfolios – can influence the classification. EIOPA already pointed out in 2016 in the Final Report on CP 16/004 and repeatedly in subsequent consultations that it is precisely the documentation obligations, data requirements and look-through analyses that significantly restrict the practical use of the privilege. Thus, the "qualified infrastructure" often remains less a question of risk than one of proof.

Therefore, the right KPI set must be developed in the respective fund design in order to be classified as a qualified infrastructure. Practice shows that this is precisely where the design task of good product providers lies: Those who anchor clean data interfaces, transparent contract logic and resilient KPI systems in the fund design turn regulatory challenges into competitive advantages.

• BESS plants in the electricity market support security of supply and grid stability.
• At the same time, BESS investments are an interesting approach for Solvency II investors to benefit from long-term cash flows thanks to their treatment as a qualified infrastructure with lower capital adequacy.
• However, Solvency II defines the qualified infrastructure within narrow limits in the sense of a template that needs to be understood and, depending on the specific fund design, correctly filled out.