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Storage behind the meter: some determining factors for end consumer owned batteries

Decentralized residential battery storage systems owned by private end customers are controversially discussed worldwide. Professionals discuss at international conferences the benefits of such solutions, saying that as of today there is no business case which delivers economic viability- without subsidy programmes- or they propose other solutions which offer higher benefits. Despite the discussion, the market already offers a variety of storage solutions which seem to be well accepted by the end-customer. How to explain such a contrast?

Photovoltaics as a success story

The development of photovoltaics often serves as an example for the anticipated development of the storage market: PV started as cost intensive technology in niche markets and is today, without doubt, in many cases competitive with conventional generation. Suitable publicly funded incentive programs such as feed-in tariffs (FiTs) or tax privileges have allowed for economy of scale in the PV sector, leading to extreme cost reduction. Particularly, residential systems were and still are one of the pillars for the sustainable growth of PV. The transformation of power systems towards decentralized, renewable-based and sustainable models needs suitable instruments to face the volatile nature of several renewable sources. Therefore, storage seems to be a “natural” complement to decentralized PV systems. Residential privately owned storage systems could be a success story, especially as private purchasers' decisions often follow their own principles, despite political or other obstacles.

Market nature – Supply and Demand

The break-through developments in the field of battery technologies at the end of last century were very moderate. The game changer was the introduction of commercial Li-Ion batteries for the consumer market. Followed by big announcements and expectations in the e-mobility-sector, a new era started. Battery manufacturers invested in research and production capacities in order to serve this "new" market, but the sales volume turned out to be insufficient. Therefore a new market and business opportunities had to be found – instead of serving a demand, the players created demand for a stationary storage market. This is one of the reasons why the most up-to-date technology today is already offered to customers at attractive prices.

Germany's strong tradition of PV deployment has made it a natural fit for energy storage systems at customer level. Image: SMA.
Residential PV Storage Systems

In Germany, traditionally a strong residential PV Market, almost every fifth PV system installed in 2014 incorporated storage. The main driver is the already reached socket/household parity and not so much the storage incentive programme, which was used by every second customer who installed a storage system. For two years now, PV-produced electricity is cheaper than electricity supplied by utilities in Germany. The more PV-produced energy used in a household, the better the economic viability of the system. Even though the gap between the electricity price and PV-generation costs is not big enough to finance the storage system, the expected increase in electricity prices in future and distrust towards utilities seems to help promoting storage.

In addition, the storage system acts as energy manager – if the PV supply is higher than the actual demand, the charging of the battery takes place. If it is lower, the battery provides the energy to supply demand. The integration of storage in PV systems gives the customer the feeling of self-dependency. Surely it will take some time to reach economic viability, but several factors such as declining system costs and increasing electricity costs already help.

There are some well-established home energy storage markets

Besides these “new” applications solely linked with PV, residential energy storage systems are already used in markets in industrialised countries – with a different scope. The main driver is reliability of supply. Natural disasters push the investment in residential “disaster recovery” storage systems. In some parts of the US, the 24/7 availability of the public grid is not always a given - battery backup systems are commonly used to increase reliability. The specific requirements to be met in those applications significantly differ from the ones that modern “energy management systems” in Europe meet today however, and while backup applications are future-proof and will keep on being a part of the market, they are not really the key driver in the further development of home energy storage systems in mature PV markets.

Barriers exist, but energy storage behind-the-meter could play an increasingly important role for both customers and the grid, argues Volker Wachenfeld. Image: SMA.
Smart devices for a smarter grid?

Battery storage systems are true all-rounders, which can be either load or generator – depending on the application and operational strategy defined by the user. Power conversion systems to couple the battery to the grid are capable of “learning” any kind of new functions required from the grid (e.g. DSO or TSO) – just like a student you can teach new knowledge day by day. The control process system of these devices is much faster than any conventional generator could ever be – regardless of any kind of environmental conditions. New requirements such as for grid interoperation might demand new software features, but will never call for additional hardware (and thus costs). If the devices have to supply reactive power or short circuit current to trip circuit breakers, stabilise grid frequency by feeding active power or support grid voltage control, there are no insuperable limits. But – and there is always a “but” if it sounds too good – why should they? There is currently no incentive to use the home energy storage system to support grid requirements.

Could we have it all – economic optimization and grid support – in one device?

Asking us as engineers, the answer is as simple as that: yes, for sure. Although the various functionalities a battery storage system can provide are linked to each other, each one will have an impact on any of the others. The combining of all possible virtues needs only an intelligent layout and design as well as an intelligent management strategy – and nothing more. The decision as to which feature is more valuable, the economic optimum of self-consumption or guaranteed emergency power supply, is to be made by the end customer – more comfort for higher costs, a simple but well established principle of mature markets. In contrast, more grid support functionalities without any economic incentive – this does not sound like a good basis for the development of a market. And we will not be able to replace the needed incentive by increased requirements in the applicable grid interconnection standards – less revenue at higher costs will inhibit any kind of market development. In times of climate change and growing demand of electrical energy, it would be negligent not to utilise decentralised, behind-the-meter battery storage to stabilise grid operation and provide congestion relief – we just have to allow them to operate economically!

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