Residential energy storage set to grow fivefold in Europe, Wood Mackenzie says
Energize Weekly, August 14, 2019
The annual pace of residential energy storage in Europe is set to double in the next six years with total of 6.6 gigawatts of capacity on the continent by 2024 – a fivefold increase from 2018, according to a Wood Mackenzie analysis.
Annual deployments are projected to reach 500 megawatts with 1.2 gigawatt-hours of storage by 2024.
“Off the back of Germany’s success, residential storage is beginning to proliferate into other European countries, particularly where market structures, prevailing power prices and disappearing feed-in tariffs create a favorable early-stage deployment landscape,” Rory McCarthy, a Wood Mackenzie senior analyst, said in a statement.
McCarthy said the European market is in the midst of an “economic tipping point” as key countries, including Germany, Spain and Italy, are moving to so-called grid parity for residential rooftop photovoltaic (PV) solar plus storage. Grid parity comes when the cost of a kilowatt-hour (kWh) from the grid and a kWh from the residential system are equal.
In Germany, for example, the levelized cost of solar-plus-storage in 2019 is projected to be 27 cents a kWh, while the cost of grid electricity is 30 cents a kWh.
The residential storage market is also getting a boost from the cutbacks in feed-in tariffs (FIT), which paid for kWh put on the grid by residential solar arrays.
“Without a FIT the householder will get less financial incentive to export the onsite generated solar PV to the power grid,” McCarthy said in an email to Energize. “There will be more value in self-consuming the solar generated kWh on site. Energy storage enables the household to increase self-consumption of its solar PV. Self-consumption can be increased anywhere from 30 percent to 40 percent.”
While Germany has been the leader in residential storage, Spain is “the market to watch,” according to McCarthy. The country has had damaging solar policies, including its “tax on the sun,” a series of grid-connection and metering tariffs.
The Spanish government is reconsidering these policies with “a nudge from the European Commission.” This, McCarthy said, “will prompt a resurgence of residential solar, paving the way for solar-plus-storage in one of the sunniest regions in Europe.”
The United Kingdom and France are farther away from reaching grid parity as the costs of solar-plus-storage systems remain more expensive on a per kWh basis, and there are either unfavorable or yet-to-be-developed frameworks for storage, Wood Mackenzie said.
“Grid parity will not be achieved over our outlook period, but deployments are expected to continue irrespective of this,” the analysis said.
Even in countries with robust markets, there still remain economic challenges. In Germany, for example, adding storage to a solar array almost doubles combined system’s cost.
“One of the greatest barriers to entry are the high upfront costs,” McCarthy told Energize. “In our base case a storage system adds 93 percent to a residential solar system, based on a 4-kW solar PV with a 5-kWh lithium ion storage system.”
“More innovative business models are needed to absorb the upfront cost, allowing residential storage to become a common,” he said.