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UK residential solar storage ‘challenge’ needs education and regulatory change

The short term outlook for residential solar-plus-storage in the UK will be “challenging”, but simple regulatory changes of the kind the renewables industry is already asking for might make a real difference, according to one analyst.

Logan Goldie-Scot from Bloomberg New Energy Finance (BNEF) told PV Tech this week that the case for installing electricity storage in combination with PV at the residential and commercial level “can be very compelling”, but the nascent market still requires education.

“Many people have presented on the UK market as either the second or third most attractive market for residential PV-plus-storage in Europe after Germany and maybe in competition with Italy, depending on how policy there pans out. [However] in the immediate future I think the market is challenging,” Goldie-Scot said.

One obvious policy barrier for the UK is that with a general election just over two months away and the nation undergoing the Electricity Market Reform process, the government has categorically ruled out introducing a policy framework for energy storage anytime soon.

The UK’s Renewable Energy Association (REA) last month hosted the inaugural meeting of its Energy Storage Group. The group aims to hear from and work with a range of stakeholders, from original equipment manufacturers (OEM) including PV module companies, engineering, procurement and construction (EPC) firms and construction contractors, distribution network operators (DNOs), government departments and NGOs.

One of the conclusions to emerge from that session, in common with industry consensus from around the world, was that storage does not need direct assistance in the form of subsidies or feed-in tariff (FiT) premiums to be economically viable at certain scales. Instead, regulations could be reconfigured to recognise the benefits that storage can provide through market mechanisms.

Logan Goldie-Scot told PV Tech that BNEF has predicted around 2.2GW of energy storage will be installed at residential and small commercial scales by 2020 worldwide. Europe's market leader Germany has installed around 15,000 to 16,000 lithium-ion based small scale systems to date. Image: SMA
Goldie-Scot of BNEF - speaking to PV Tech at the Energy Storage Europe event in Germany this week - gave one example of how government, public and electricity industry interests could be aligned by market forces.

"In virtually all these scenarios, the PV-and-storage owner is still connected to the grid. They’re still using grid electricity for, let’s say, 30% of the time. They’re still reliant on the electricity network and if they’re not supporting that, it’s very hard to see that sustained in the longer term.

While it may not be immediately popular with some solar advocates, Goldie-Scot said that the levying of a “fixed network fee” on combined solar and storage systems and changing tariff structures so that connecting capacity is paid for by the kilowatt, rather than per kilowatt hour of generation, could provide a “constant sort of cat-and-mouse game between storage suppliers and other developers and government”. For its part, Germany has recently moved to a ‘feed-in limitation’ system, where only a certain proportion of PV-generated electricity can be sent to the grid at any time. Additionally, to help pay for the nation’s transition to renewable energy, commercial PV system owners must pay a surcharge based on their system size, although systems below 10kW - therefore including the vast majority of residential users - are exempted.

“If we switch to a fixed network connection fee, based on your peak demand, so if in Europe we move away from a euros-per-kilowatt-hour tariff and move to a euro-per-kilowatt-connection tariff, then there’s a different opportunity for storage and you will have this constant sort of cat-and-mouse game between storage suppliers and other developers and government. That is a natural market development. So there are risks associated but also opportunities within each of those.”

Another alternative could be to mandate energy storage to be installed alongside renewable energy installations, Goldie-Scot also said.

The other aspect of making this - and any other new technology - attractive to the market long term will be cost reduction. Ray Noble, a consultant to the UK's Renwable Eenergy Association, who chaired the group’s energy storage meeting, said this week that he was very optimistic on the opportunities in that area, especially if electric vehicle adoption could be linked to stationary storage. Speaking at a conference on solar finance in the UK, Noble said technological advancements in lithium ion batteries driven largely by the automobile sector had meant that storage batteries for residential installations could be affordable within two or three years.

At present a lithium ion battery system holding enough storage for an average three-bedroom home in the UK is expected to cost between around £2,500 (US$3,700) to £4,000. However Noble said he expects this to be reduced by half within three years making them a viable option for residential installers.

“The market will open up as prices come down, [business] models will change and different business models will come into play,” Noble said.

Much of the activity at residential level is concentrated on new build installations but retrofitting "could be interesting". Image: SunPower.
Retrofit opportunity

Logan Goldie-Scot also said that his team had been surprised that there has not been more of an emphasis on retrofitting batteries to existing installations in Germany, which is considered to be the current market leader for small-scale energy storage in Europe by some distance.

“Nine out of 10 of the systems in Germany that have been sold, according to a couple of media reports and a few installers we’ve spoken to, have been for new build rather than retrofit. We’ve often wondered why that retrofit number is relatively small.

“For many systems we believe that the inverter has to be replaced between around seven and 10 years into the system but it’s not something that often gets talked about. Many inverter manufacturers will argue there’s a longer lifetime, and that’s fine, but our understanding is that some replacement may be necessary over the 25 year lifetime.

“That does seem like a very interesting opportunity for storage at that replacement point, but the market is currently being dominated by new build and I think that’s probably just a sales question at the moment, where most PV installers are focused on that new opportunity. [Retrofitting batteries] at inverter replacement time - that could be interesting.”

Additional reporting by Liam Stoker.

Read the PV Tech Storage Editor's Blog for more observations and findings from Energy Storage Europe on how the market for residential, commercial and grid-scale storage could aid the widespread deployment of renewables.

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