Power to the people

Despite Elon Musk’s near-ubiquity on the tech pages of most mainstream media, the Tesla entrepreneur has a knack of stealing in on the blind side. His pithy, often cryptic tweets remain the unofficial-yet-official PR channel for the firm, and Tesla’s various product launches – while slick and polished with a Silicon Valley sheen once they actually begin – tend to come to the wider world’s attention via a kind of cloak-and-dagger practice that feels at once passé and yet somehow refreshingly contemporary.

Misdirection is not quite the name of the game, but there can be no denying that Tesla and Musk have picked up where Apple and Jobs left off a few years ago: dazzle and woo with enough conviction, and the world cannot help but be impressed. But whereas Apple consistently delivers quality, the jury remains out on whether Tesla can do likewise.

Its inaugural Powerwall home battery, launched in April 2015, is a good example. Speak to most storage insiders and they will tend to say the same thing: that they welcome Tesla’s involvement in the industry, the attention is great, but no, they are not worried about the Powerwall stealing their customer base. And why? Because on a technical and cost level, the Powerwall – the consensus appears to be – pushes few boundaries.

“I personally don’t care about Telsa like I did in the past,” Dr. Andreas Piepenbrink, CEO of E3DC, told pv magazine. “Tesla is already on the blacklist for German installers. The Powerwall is freezing during winter, and many batteries failed. Tesla has not achieved market volume, and its ignorance of service, quality and installation will not bring further success.”

When Tesla launched its first Powerwall, the company cited an apparently attractive price point of $3,000 for its 7 kWh model, and $3,500 for its 10 kWh model. However, these were basic unit costs, and did not take into account associated balance of systems (BOS), installation, warranty or service costs. In short, while the aesthetically pleasing, affordable-sounding Powerwall grabbed the headlines, its home storage rivals busied themselves with the muckier business of making their batteries more efficient, reliable and financially viable for the average homeowner.

To Tesla’s credit, and in what is yet another close parallel to Apple, the firm has announced that the Powerwall 2 will deliver far lower installation costs and greater capacity than the first iteration. But by introducing such an improvement merely two years after the original, is Tesla helping to nurture a “wait and see” approach to home storage that is, in effect, slowing the cost reduction curve and limiting wider uptake?

Integrated costs
Average home battery cell prices currently stand at around $400/kWh, and while Musk is confident that Tesla’s new U.S. gigafactory can bring that figure closer to $250/kWh (according to Bloomberg New Energy Finance, the 14 kWh Powerwall 2 battery retails for $393/kWh based on a sale price of $5,500 and an estimated installation cost of $1,500), Dr. Piepenbrink remains skeptical that such a price point can be reached within the next three years for stationary home batteries.

Calculating the true cost of home storage systems is tricky because there are numerous metrics to consider, including retail price of the battery, warranty costs, BOS costs, installation costs and different ROIs based on varying charge/discharge ratios, capacity and live time.

“Battery prices have a wide range, and different batteries have different applications, so it is difficult to accurately assess costs,” Sam Wilkinson, IHS Markit senior research manager for solar and energy storage told pv magazine. “It is important to note that there is a big difference between what is driving storage, and what has driven the solar industry. It is now about cost savings, rather than income. Investing in solar a few years ago was like putting money in the bank; today, with storage, it is more about hedging against increased power prices and one’s desire to be less dependent on the grid.”

With this in mind, many analysts tend to talk in averages and trends where distributed storage costs are concerned. Helena Teschner, senior expert of politics and markets at the German Energy Storage Association (BVES) says that the average integrated distributed storage cost in Germany is between €1,200 – €1,500/kWh ($1,270 – $1,580/kWh).

Bloomberg finds that the global average cost for an integrated battery system stands at $1,175/kWh, while in the U.K. – a market that is fast-becoming a leader in the distributed storage space – some companies such as Powervault and Moixa are offering price points even lower, closer to $1,050/kWh, according to BNEF.

In the leading distributed storage market of Australia, total integrated storage costs have been as high as $1,700/kWh in 2016, according to IHS Markit solar research manager Cormac Gilligan. “Looking ahead, IHS predicts that the battery module costs in kWh will be halved between now and 2020, and similarly the balance of system costs are expected to reduce 10-15% a year.”

Nevertheless, the average payback for homeowners tempted to install a battery storage system is around 10 years, and that – according to most analysts – is too long. Until this payback cycle is reduced, distributed storage in the home will remain an emotional rather than economical decision, some fear.

Thinking differently
Battery storage developers need only look askance to their solar module counterparts to know that cost reductions can happen quickly, given the right conditions. The switching on of Tesla’s gigafactory will double the global production of lithium-ion batteries this year, which should serve to expedite cost reductions in this space. But chemistry improvements are predictably calculated; what needs to change, believes Simon Daniel, CEO of British storage firm Moixa, is the whole conversation around distributed storage.

“The price of a cell and the price of a system distinction is important,” Daniel told pv magazine. “In general, prices around the world are ~$1,000/kWh per integrated system. There are a range of additive costs, and so it is integrated systems that are the thing to optimize.” Moixa’s approach has been semi-bespoke in its thinking. Daniel states that the firm’s overarching intention is to drive mass market adoption of home storage. And to do this, he stresses, batteries need to be right-sized, appropriately meeting the needs of the average household.

“We think that most of the international battery providers have generally been prosumer and/or early adopter, delivering niche storage products for high-end customers,” said Daniel. “It is like buying a Bang & Olufsen stereo. There IS a market for it, but it is a limited number of units. Whereas if you want to sell to 100% of the market, these big products are not something that can be offered to all customers.”

Moixa’s Maslow home battery was designed to be suitable for any kind of household. Offered at 2-3 kW, it is small enough to be installed by a single person, does not take up too much wall space, and is large enough to complement the homeowner’s energy consumption patterns.

“The philosophy of our product is both universal mass market, and also to work with utilities,” said Daniel. “In our eight-million run hours of data and projects that we have conducted for the U.K. government and British utilities, the sweet spot in our view is to power around a third of the day with a battery, which enables the utility to shift energy to a low price or manage an imbalance.”

The thinking is to treat batteries as smart, responsive, grid-connected appliances rather than as back-up sources of power or as a means to take the homeowner off the grid. “When you take a British home off the grid, you start to put power in the wrong place because you may only go off-grid temporarily. It’s not a very efficient use of technology.”

Moixa offers its solar+storage kit for £4,995 ($6,200). It comprises a 2 kW PV system, a 2 kWh battery, inverter and all other BOS components. The price also includes VAT and installation costs, and Daniel believes that this package is perfectly pitched to meet the needs of the U.K. homeowner.

“The U.K. is not an early adopter market for storage,” Daniel admits. “Where you have markets that are driven by subsidy like in Germany and California, or Australia with its high electricity prices and network issues, then you have different types of storage that get adopted early. The U.K., however, is currently probably the best scale-up market because it has large amounts of solar installed [BNEF estimates that some 900,000 residential homes have a PV system installed in the U.K.], it has peak energy challenges, and it has plenty of financiers interested in funding new assets.”

There is also growing customer awareness in the U.K., despite the current absence of any supportive government scheme for storage. But even here, things are changing. “The U.K. government has just concluded a consultation exercise on a new storage policy, which has been a long time coming,” stated Daniel. “The government now seems very cognizant of the opportunity for storage in the U.K. grid system at all levels.” Mooted changes include the abolishment of the double-taxation for storage, as well as a removal of reams of red-tape. “We are quite optimistic about the policy interventions coming in the Spring,” Daniel adds.

A smarter battery
One of the more tangible policies the British government has outlined, in addition to a recent $11 million injection in funding for the storage sector, is its stated aim to install smart meters in 53 million houses and small businesses by 2020, to gain a better understanding of how energy is consumed nationwide. Some storage insiders, including Powervault managing director Joe Warren, believe that this roll-out will make more people aware of their energy consumption, and could well trigger an uptake in energy storage systems.

However, shifting an entire country’s behavioral patterns is nigh-on impossible, believes Daniel. “Strategies designed to change consumer behavior don’t work. But storage is a viable asset. It is a reliable means of reducing or shifting energy demand without interrupting customers’ behavior, and is therefore very strong as a grid-related demand class.”

In Europe, far more than in Australia and parts of the U.S., power grids are driven by domestic peak. For the U.K., residential properties comprise only one-third of the nation’s power consumption annually, but account for two-thirds of peak energy usage. Hence, in Britain and other northern European countries, high grid costs are largely related to domestic energy use, whereas in California, for example, it tends to be the other way around, with commercial and industrial (C&I) consumers pulling the bulk of peak power.

“One could argue that the role of behind-the-meter storage in Europe is far greater in opportunity than other countries because the shape of the grid is driven by domestic peak,” said Daniel. By working with this fact, battery providers can help to not only increase distributed storage adoption, but also help to lower battery and grid costs.

Moixa’s Gridshare is one example of aggregated platforms that are becoming increasingly popular with growing-penetration storage markets. Germany’s sonnen has its own community energy trading platform called the sonnenCommunity, and Sunverge and E3/DC offer similar services. By sharing stored energy among households, such platforms can help to reduce peak demand and create a “flat grid”, shorn of consumption spikes or troughs. As more renewable energy is added across the world, such platforms could become vital in enabling grids to manage increased variability.

“One of the reasons that power utilities are going out of business is because they cannot deal with increasing price spikes unless they have storage,” said Daniel. “In real time, more distributed storage controlled via a virtual power plant platform such as the Moixa Gridshare, can solve these problems, which are only going to get more demanding as more solar is added to the grid.”

The growth-cost connection
Solar PV enjoyed its strongest year ever in 2016, adding more than 70 GW of new capacity. In growing 34.2 GW alone last year, China not only outpaced all other markets, but ran into great difficulties with curtailment. Many parts of the Chinese grid are simply not equipped to handle the amount of solar power being built, and the nation’s woes serve as a warning for other countries keen to scale up solar. That warning being: do not overlook battery storage.

And while utility-scale storage projects in China, the U.S., Australia, Japan, the U.K. and other leading markets are beginning to prove their worth, the efficacy of distributed storage in helping to ease grid load and drive down battery costs cannot be ignored.

In Australia, which has the world’s highest penetration of rooftop solar PV per capita, IHS Markit forecasts that the installed base for distributed storage will more than double in 2017, from 100 MW last year to between 250 – 300 MW this year. Germany ended 2016 with 240 MW of behind-the-meter storage installed, and is set to grow 20-30% this year, while the U.S. and U.K. distributed storage bases are on course to double in 2017, from capacities of 140 MW and 50 MW respectively, according to IHS Markit.

And as solar installation figures continue to wane in Europe particularly, there emerges another driver for distributed storage uptake – as a means of survival for thousands of solar installers. “To put it bluntly,” said Wilkinson, “the fact that there are a lot of solar installers trying to keep their jobs makes storage the next logical step for them to rescue their businesses.”

In Europe’s leading storage markets of Germany, the U.K. and Italy, storage services are being offered by an increasing proportion of solar PV installers. In Germany, an impressive 77% of installers also offer to fit home batteries, according to recent data by EuPD Research. In the U.K that figure has risen from 12% to 18% in the space of a year, while in Italy it has held steady at 20%.

Another sign of the storage sector’s evolution is the gathering clamor for battery makers to prove their eco-credentials. In much the same way solar’s carbon costs have been scrutinized, attention is turning now to battery technology – assessing the relative energy costs related to mining and manufacturing units.

“To a large extent, the import duties on solar components into the EU and U.S. from China should have been carbon-related rather than an import tax because that would have been a fairer reflection of the relative energy costs,” concluded Daniel. “We will strategically see that kind of thinking in storage once it becomes an integral part of the grid. It’s not yet front-of-mind, but it does relate to how cost-effective a battery really is.”