IHS: Residential PV storage market to leap tenfold by 2018

Worldwide annual residential PV installations paired with energy storage by region (in megawatts). Image: IHS.
The market for residential solar paired with energy storage will grow tenfold by 2018, despite the relative failure of deployment to “live up to hype", according to a new report from analysis firm IHS.

A global market which totalled 90MW this year, will reach 900MW by 2018, the report predicts. However, IHS research manager Sam Wilkinson said the company had revised a previous forecast for residential PV installations in the key markets of Italy, Germany and the UK, made in April 2013 for the period from 2014 to 2017, downward by 50%.

Wilkinson said reduced government incentives had played a significant role in lowering the attractiveness of photovoltaics (PV), which in turn has restricted growth in energy storage deployment at the residential level.

Another significant barrier to deployment has been the price of storage systems, according to IHS. This includes the batteries and power conversion systems at the heart of a storage setup. The average price of lithium-ion batteries has fallen by 20% in 2014 alone, but remains relatively high nonetheless. According to IHS this means that the complex business models for storage only exist in a small number of niche markets, where end user demand and subsidies have come together.

IHS expects 2015 to be particularly significant, with further cost reductions for lithium-ion of 15% expected during the year, and the residential PV market to finally return to growth for the first time in three years

Wilkinson said that by 2016, residential PV in Germany would be more attractive with storage than without it.

“The three key variables that determine whether it’s economical to add energy storage to a residential PV system to increase self-consumption are the value of the feed-in tariff, the expense of buying electricity from the grid, and the cost of energy storage products. And all of these metrics are moving in the right direction,” Wilkinson said.

“Although the high cost of batteries means that today in Germany, PV systems without storage offer a greater return on investment than PV systems with storage, IHS predicts that each of these key parameters will have moved to such an extent that this situation will be reversed by 2016.”

Wilkinson told PV Tech this morning that Germany is expected to install “100MW of photovoltaic energy storage (PVES) from 2017 onwards,” which would equate to 20,000 systems, with residential systems defined as being those less than or equal to 6kW.

Residential solar in Germany will be more attractive with storage than without it by 2016, Sam Wilkinson of IHS says. Image: ASD Sonnenspeicher.
IHS highlighted Germany, Australia, the UK and Italy as all being countries where self-consumption of electricity is particularly attractive. By 2018, the analysts predict that the four will represent 40% of the 900MW global market, despite being predicted by IHS to only make up 20% of total residential PV installations worldwide.

The UK will see a number of residential storage products launched next year, as seen at the recent Solar Energy UK show, from a range of companies large and small. Wilkinson told PV Tech that although the majority of new entrants to join the market in 2014 and 2015, others would continue to join it after that initial wave. Asked how much he expected residential systems to cost in the UK in 2014, Wilkinson offered an estimate of between US$11,000 and US$12,000 for a system with 4.5kWh to 5.5kWh nameplate capacity. 

Interestingly, the market expected to lead the rest of the world for capacity of storage deployed at residential level will not have the most attractive economics for self-consumption, according to IHS. Japan, where the feed-in tariff (FiT) remains high enough that it makes more financial sense to export to the grid than to self-consume, will nonetheless install a significant fraction, 200MW, of the 900MW total deployment in 2018.

Japan’s well-known problems of energy security, especially since the shutting down of the nation’s entire nuclear generation capacity since the Fukushima crisis, mean the government has launched a subsidy programme for lithium-ion batteries for residential and commercial use. Frequent blackouts and the large gap between peak and off-peak electricity prices mean that storage has enjoyed “huge interest” in Japan, IHS claims.

IHS predicts that residential solar will enjoy a resurgence, which will contribute significantly to the growth in storage deployment. Image: SolarCity.
The analysis firm does not expect backup power from storage to be as significant a driver elsewhere in the world. In countries that have well established PV markets, in particular, electricity blackouts are relatively rare and therefore will play a fairly minor role, Sam Wilkinson said.

The unpredictability of the many variables at play, as well as the influence that each of those variables could wield, made it a difficult market to invest in, and had hampered appetite for PV-plus-storage at the residential level to date, argued Wilkinson.

“In situations where a financial justification for adding energy storage to a residential PV system does exist, the business case is highly dependent on several variables, such as the levels of self-consumption that can actually be achieved, and the development of retail electricity rates over the next 20 years. The fact that these variables are impossible to ensure and so difficult to predict makes the investment relatively insecure and has further hampered end-user appetite for residential PV energy storage,” Wilkinson said.

Meanwhile, a recent report by US-based research firm Navigant looks into the market for advanced battery materials. The report stated that advanced battery materials such as lithium-ion, advanced carbon lead-acid and redox flow is “starting to significantly penetrate the stationary, portable, and transportation markets". Navigant predicted that while lithium-ion will dominate shipment figures for the near future, “other chemistries will be making vast leaps in growth over the next 10 years”. By 2023, Navigant forecasted, primary component materials for advanced batteries will jump from being a US$7.3 billion market in 2014 to a US$19.3 billion market.

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