We had the opportunity to visit the Intersolar & EES Europe Conference and Exhibition in Munich recently. It’s clear there’s a boom around storage in Germany. Views vary but we think around 8,000 home battery storage units were sold over the last year in Germany, and the market continues to grow. There is a powerful combination of an increasing number of products on the market, lower prices, effective marketing (thanks Tesla!), subsidy support and significant penetration of solar PV. This makes a heady brew – a potential bubble in the making.
So great news about near term market prospects. What is not so positive for those in the market, is the number of players trying to grab market share. Barriers to entry are quite low and everyone sees the same opportunity. There could be 50-60 players in the market, and many players will be selling low hundreds of units. Even in a rapidly growing market this number of suppliers is unsustainable.
Being a wholesaler and offering a route to market for the many players without their own distribution channels or customer base appears to be a low risk way of riding the storage wave in the near term. While manufacturers of batteries will certainly be revelling the opportunity to supply the score of new entrants.
Will the market grow to significance - say to tens of thousands or even exceed 100,000?
Although customers are increasingly looking at storage systems to increase their energy independence and to reduce costs, the German market for [home] solar storage is fundamentally driven by the support from the state owned KfW development bank. So building a product business based solely on the current market dynamic without achieving significant reductions in product costs is high risk.
But in addition to product businesses, we did see other, innovative business models being discussed and presented at Intersolar / EES. Ideas around ‘swarm’ batteries and grid relief may release additional value and create market pull. One example that stood out was the idea of ‘energy banks’. While not a new idea, we see companies trying to further develop the concept – install a large battery near a residential area and local residents have the ‘right’ to store a certain amount of energy in the community ‘energy bank’. Obvious cost benefits but also potential additional value streams can be realised for network operators – it’s a shorter step from here to a virtual power plant.
It’s not all about residential solar storage
So far I have just talked about customer side of the meter storage – this is where the current hype is. But there are a wide variety of applications on both the customer and utility side of the meter and it requires real insight to understand where and how storage markets will grow. We spoke with companies that have over 100MWh of storage installed and operating today or will do in the near future. In their view, storage makes most sense on the grid side of the meter or in off-grid locations (or in remote parts of the world where grid supply is unreliable). Understanding the different applications and use cases which make most sense for network operators, how best to combine distributed generation and storage, as well as how to capture the value from new business models are the key questions across the energy storage industry. These are among the questions Delta-ee are addressing in our Energy Storage Insight Service.
Regardless of the longevity of the current boom around residential storage in Germany, it is clear to Delta-ee that energy storage will play an important role within the transformation of the energy system from central to distributed.
Since Delta-ee’s first study into energy storage in 2009, we have been tracking and monitoring the industry’s developments.
We are now preparing to launch our Energy Storage Insight Service later in 2015. See here for an overview of our new research and contact me for more details.