SummaryTo reduce greenhouse gas emissions, many countries plan to massively expand wind power and solar photovoltaic capacities. These variable renewable energy sources require additional flexibility in the power sector. Both geographical balancing enabled by interconnection and electricity storage can provide such flexibility. In a 100% renewable energy scenario of 12 central European countries, we investigate how geographical balancing between countries reduces the need for electricity storage. Our principal contribution is to separate and quantify the different factors at play. Applying a capacity expansion model and a factorization method, we disentangle the effect of interconnection on optimal storage capacities through distinct factors: differences in countries’ solar PV and wind power availability patterns, load profiles, as well as hydropower and bioenergy capacity portfolios. Results indicate that interconnection reduces storage needs by around 30% in contrast to a scenario without interconnection. Differences in wind power profiles between countries explain around 80% of that effect.