Prices for energy storage systems are anticipated to fall by around 10% annually, but “even by 2020 this may still not be sufficient to allow the UK market to grow above 15,000 units per annum, Delta-ee researcher Julian Jansen cautioned. Lessons could be learned from the German or the US model.
The payback for a newly installed PV + battery storage system is more than 16 years, so “finding ways to reduce this payback and make storage more attractive to customers is crucial to grow the market, ”Mr Jansen said, who leads the Delta-ee Energy Storage Research Service.
The chart above shows the results of Delta-ee’s in-house modelling profiling end-customer payback periods for a PV system (4kWp) combined with a typical 3kWh Lithium-ion battery storage product, today and in 2020. The payback improves by 2020 but remains over 10 years despite the forecast reduction in storage system costs.
In contrast, the German market is already way above 15,000 units per annum – as the result of a combination of subsidy, higher electricity prices and a bigger PV market. New business model approaches are being established in Germany, and Delta-ee suggests the UK may want to adopt part of these measures to reduce customer paybacks below 5 years.
Opening new revenue streams
“Pay customers to allow third party control of their battery,” is one of the options identified to reduce paybacks. Typically this involves the third party aggregating many residential batteries and bidding into ancillary services markets. However, in order to achieve a payback for customers of 5 years in 2020, Delta-ee’s modelling shows that customers will need to be paid around £500 per year.
To put this into context, UK technology developer Moixa is currently offering payments of £75 p.a. to customers, although in Germany Fenecon / Ampard are already offering customers €400 p.a. (circa £320).
Projects for lease or rent
The second option is “innovative financing approaches, such as leasing / rental models.” Hereby the customer pays a monthly fee and a utility can take control of the battery systems at times to earn additional revenues.
The upfront cost barrier for customers is removed and lifetime costs to the customer are considerably lower than if based on an outright purchase of the battery. There are fewer examples to date of this approach, like the US Vermont utility Green Mountain Power or German regional utility Entega.
Ultimately, it is three factors – additional revenue streams for customers and innovative financing – that will determine whether residential energy storage will develop into a mass market in the UK, which would also help advance decentralised power generation.
Storing solar power vs back-up capacity
Once energy storage gains cost competitiveness, excess solar power can be used on a rainy there; but so far it is mostly flexible gas power plants that have to provide backup.
Wärtsilä has recently entered the solar energy business by combining solar PV plants (10 MW and above) with internal combustion engines. Its first solar project is a retrofit hybrid gas plant in Jordan.
“Large-scale solar is big business,” according to the Finnish OEM which expected the installed base to grow fourfold to 450 GW by 2025, resulting in annual sales of €300 million in 2020.