With an incentive programme now in place, the German PV industry looks to promote self-consumption, but what do installers and adopters need to know?

Bye Bye FIT - Hello Self-Consumption

Sara Ver-Bruggen | Reprinted with permission - Energy Storage Journal

PV or PV and storage

In Germany a household looking to protect itself from rising electricity rates over the next couple of decades now has two choices. In the first, and more established, option a household can install a PV system and the government guarantees the owner a fixed payment amount for every kWh of electricity produced by the panel, called a feed-in tariff (FIT), over 20 years from the year of the installation. Within a few years, the homeowner covers their initial investment and gets to pocket the rest.

The second option is to invest in a PV and a battery system that lets the household use more of the energy its solar panels produce and reduce its reliance on electricity from the grid. With a standalone PV system, the most electricity generated that can be consumed on site is about 30%, while the addition of storage can increase this to 65-70% or more.In Germany, where PV electricity has reached grid parity in some areas, investing in a PV and storage system can – despite the larger upfront investment compared with a standalone PV system – ensure similar savings on electricity bills spread over 20 years. In Germany, the customer has to pay approximately EUR0.27 per kWh for electricity from the local utility provider, while the FIT rates for residential PV systems are likely to reduce to about EUR0.14 per kWh in mid-2013, so consumers are better off consuming more of their self-generated PV electricity instead of importing it from the grid.

Bonn-based solar and cleantech consultancy EuPD Research recently carried out a survey in Germany and concluded that households, and other end customers, appreciate how PV and storage reduces reliance on grid electricity. Like solar PV adoption in the late 1990s, pioneers of PV and storage will mainly be in the form of residential and small-scale users, the consultancy asserts.

Self Consumption Rate & Solar Fraction – Residential (Germany)

How grid-connected PV and storage works

PV and storage systems must be able to operate within a grid connected configuration, as opposed to off-grid systems, where a household is totally reliant on meeting its entire electricity demand. Grid-connected PV and storage systems minimize the amount of solar energy that is dispatched to the power grid during daylight hours, when it is not needed, and maximizes on-site consumption of solar energy to reduce demand on the power grid during peak periods and, in essence, hedges the consumer against increasing electricity prices over many years. 

Typically, the installation of an energy storage system with a PV panel would allow a household, in the morning, to optimise own-consumption of the PV electricity being generated, while any surplus is directed to charge up the batteries in the energy storage system. In the afternoon hours, when the batteries are completely charged, the system provides electricity for the household’s own use – for instance for operating appliances that are configured to work during the day time when no one is at home – and feeds surplus energy, generated by the PV panel, to the grid. In the evening the system switches to using energy stored in the battery and if the battery capacity falls short of night time demand electricity can be drawn from the grid. In the summer months – when days are longer with more sunshine hours – a household could almost use all of its own PV-generated electricity without needing to rely on the grid.

The economics

In a recent report IHS Inc calculated that, based on factors such as electricity rates continuing to rise at a similar trajectory to recent years, then a ‘typical’ German household can expect to spend nearly $50,000 (EUR39,000) on electricity bills over the next 20 years. Installing a 5 kW PV system, and benefitting from the current FIT rates, this amount is nearly halved. Investing in 5 kW PV system with storage would ensure savings almost on par with the PV system option. However, the additional cost of the energy storage system would roughly double the upfront cost of the investment. While PV panel prices have come down in recent years, batteries – especially high performance lithium-ion (Li-ion) devices – have not seen equivalent reductions, as stationary storage is still very much a new market for Li-ion cells. Faced with both options, there is little incentive for a household to go for the more expensive upfront outlay required for a PV and storage system.  

To make households and other small investors consider PV and storage investments, the German government announced plans for a new type of subsidy – a bonus payment – that would, over the 20 year lifetime of the system, make the household better off by several thousand euros, compared with the PV only option. On 1 May, the government finally introduced this new sweetener, which pays out bonus payments for each kW of the system’s size. These are paid upfront. Low interest loans, to provide households and other investors with the cash to finance their PV and storage installations, are also available as part of the programme.

IHS Inc forecasts that with a 5 kW PV system a household could expect to pay in the region of $27,000-$28,000 in electricity rates, while the PV and storage with subsidy would reduce this to below $25,000 over the same 20 year period. The subsidy will reduce the average cost of a 20 year PV and storage system by about 10%.

How long the new subsidy initiative will last for is not clear, though the German government has confirmed a budget of EUR25 million for 2013 and the same amount for 2014, according to PV Magazine. If successful, the programme will incentivise investment in storage systems and, as demand grows, battery costs will come down, making storage more cost-effective and mainstream in the years ahead. By 2020 Li-ion batteries will more than halve, from around $500-600 kWh today to $200 per kWh, according to some forecasts, while other projections are more cautious, but seeing how rapidly PV panel prices have fallen in recent years, anything is possible.

Ascertaining demand

EuPD Research suggests that interest in PV and storage systems will occur later in 2013, even early next year, in Germany and from next year demand will start to seed in other European markets, including the UK. In Germany the sorts of companies that are promoting products in anticipation of this new solar self-consumption market include specialist smart energy storage system developers and suppliers and also inverter companies that are beginning to round out their offerings with small storage systems and smart home gadgets that connect up to appliances.

However, the number of companies actually producing and delivering goods are fewer in number. They include E3/DC, Varta, Voltwerk (now part of Bosch), Prosol and Dispatch Energy. E3/DC, a subsidiary of German energy, IT and telecoms utility EWE, has made several hundred units so far and is establishing distribution networks through a collaboration with Trina Solar. Prosol, which has had supplied smart energy storages systems for installations by customers since 2010, has established an extensive distribution network that includes German utility RWE. Voltwerk has developed an integrated energy management system, designed to have increased battery capacities, has made models with 4.4 kWh and 6.6 kWh capacities available since May 2013. Varta Storage, part of the Ellwangen-headquartered battery maker, is adding to its wide portfolio of power storage applications with Engion. Start-up Dispatch Energy, which produces its own Li-ion cells, will shortly begin delivering systems to PV partners.

Qualifying for the subsidy

German state-funded bank Kreditanstalt für Wideraufbau (KfW), which provides financing support for the country’s renewable energy programme, is in charge of the PV and storage subsidy (programme ref. 275). Households and other customers will first need to go to their local bank with an offer in hand for a system and apply for the bonus, which is a maximum of EUR600 for each kW of the system’s size. There are several criteria that systems must meet in order to qualify. For instance, systems must be under 30 kW in size and the maximum amount of PV generated electricity that can be exported to the grid is 60%, over the 20 year lifetime of the PV system. Other criteria span warranties and other issues such as ensuring systems can be replaced with new batteries in future. The criteria need to be met to qualify for the bonus, not for the low-interest loan. Once the application is accepted the funds are made available for the customer to pay for the installation of the system.

While Germany is driving the residential energy storage market, growth has fallen a little short of expectations, due to delays and uncertainty over the storage subsidy, according to EuPD Research. Nevertheless energy storage system suppliers are reporting positive feedback from the market via their distribution partners. Dispatch Energy’s MD, Dietmar Gruidl, says: ‘We hear there is already a lot of interest’. A Varta spokesperson says the company, which began serial production of Engion in early 2013, is already ramping up production and capacity to meet anticipated high demand for the system, while another smart energy storage system supplier anticipates selling several thousand units during 2013.

Depending on system sizes, the subsidy could finance in the region of 15,000 installations, or more, in 2013. Under the scheme retrospective PV installations under 30 kW going back to the start of 2013 can also qualify for the subsidy.      

Integrated or kit system approach?

Two routes to market for energy storage systems are emerging. One is where these systems are sold as part of a kit, where the main components of the system, including the storage system and inverters, are sourced separately and put together by electricians or other qualified installer. The other option for the installer is to provide an integrated product.

The global inverter company SMA has two products in the pipeline designed to cater for each approach. The Sunny Island 6.0H is promoted by the company as a flexible storage solution for end-users that want to assert their self-consumption and be as grid-independent as possible. The battery inverter is compatible with all PV plant sizes, PV inverters and battery types including both lead acid and Li-ion and the battery storage capacity can be increased with more batteries to meet changes in the household’s electricity needs.

SMA’s integrated Li-ion battery-based energy storage product, Sunny Boy 5000 Smart Energy (SE), is designed for smaller households, typically with a 6 kW PV roof system and a 5 kW peak inverter, whereas the flexible Sunny Island system can work with PV inverters in 5 kW up to 10 kW range. ‘Sunny Boy 5000 SE is based on a plug-and-play principle and is a more straightforward product for PV installers to sell to their end-user customers,’ explains Tom Rudolph who heads up the company’s energy management solutions unit. Both systems can be used as part of SMA’s  Smart Home, a communications system that maximize self-consumption by connecting up to household appliances and scheduling when to switch them on to use as much PV energy as possible and store the remaining PV energy for the evening hours. The Sunny Boy 5000 SE can also be connected to home management device that ensures the amount of electricity exported to the grid does not exceed 60%.

Tom Rudolph, head of SMA’s energy management solutions business unit
(Source SMA)

SMA introduced the 2.2 kWh device for the first time at Intersolar 2012 but it will not be available until later in the year. Rival inverter supplier Power-One recently announced its own prototype of a small Li-ion battery-based integrated storage system. Power-One’s prototype will supplied as a standard product with a 4.6 kW inverter and 2 kWh Li-Ion battery, but, if needed, the battery capacity can be expanded up to 6 kWh with the addition of two additional battery modules, so that the household can take advantage of cheaper Li-ion battery prices in future to boost self-consumption further. The system is going into production later this year and is unlikely to be available until early 2014.

Rudolph adds: ‘At the moment the market caters for different systems and approaches, with some companies supplying complete systems, which includes a cabinet of batteries that sits in the garage or basement. But some of these approaches require specialist electrical engineering knowledge and understanding of battery systems. Not all installers are going to have this.’

Assessing self-consumption

With ongoing digressions FITs are looking likely to phase out in Germany within two years and the days of big panel installations blanketing a homeowner’s roof to maximise earnings from high FIT rates are over; the trend is for smaller panel sizes. Installers must now emphasise the potential for PV and storage systems to save the household money. But this depends on several factors that have to be understood. The key ones are the load-profile, dealing with appliances that use electricity in the house, and energy consumption habits of the end-user. The battery storage capacity, therefore, needs to be matched to meet the self-consumption requirements of the end-user.

Then there other decisions to be taken, such as whether to have a DC- or AC-coupled system. EuPD Research advises that for new PV installations with integrated storage solution the wiser option is to have a DC-coupled battery, where the battery is connected to the circuit prior to the conversion to AC, where a specific inverter, featuring a charge regulator, is used. For a PV system already installed integrating an AC-coupled battery may be the better option as it only requires the addition of a second inverter. However, the additional conversion back to DC leads to further efficiency losses.

A potential game-changer could be the partnership between Prosol and inverter supplier Sustainable Energy Technologies in Canada. In order to connect low voltage batteries to the grid, while reducing efficiency losses, Sustainable Energy has developed an inverter, for AC-coupled systems, which enables single circuit bi-directional conversion of DC to AC and AC to DC to reduce multiple conversion steps. The inverter confirms to VDE 4105, a tough standard for the direct connection of low voltage batteries to the power grid with full European smart grid utility controls, and has the highest round trip (charging and discharging) efficiencies, of more than 90% compared with 80-85% for alternatives. DC-coupling is also an option.

In a PV and storage system the inverter acts as the main control point that manages the interconnection between the batteries, the solar panels, the utility grid and the consumer. Therefore, many inverter suppliers are establishing distribution partnerships with energy storage system suppliers that are suitable for deployment with their system or – like Voltwerk and SMA – are going down the route of developing and manufacturing energy storage systems and related products and services. In order to minimise efficiency losses some energy storage systems available are high voltage, but whether it remains to be seen whether there is mainstream market appeal for households plugged into high voltage battery banks.

For the PV industry’s long term growth energy storage could be a significant opportunity in the coming years but it will require some serious commitment for installers to ensure that their teams and staff are able to sell and install energy storage systems well, to ensure customers fully benefit from the savings that storage in conjunction with a PV system can provide. Businesses from other industries will also be looking to expand their offerings and services by supplying energy storage systems.

‘In the past installers did not have to be concerned about the appliances in a household that used electricity, now they have to work with customers to evaluate the energy footprint, to carry out a due diligence exercise into the household’s energy consumption patterns,’ says Rudolph. He says that this requires more understanding of IT and home automation technologies as much of the software for processing this information is done in online software packages.

‘Explaining to end-users how they can maximise their PV and storage systems will require that installers understand the different models and benefits for energy storage and are able to clearly explain these to end-users. Energy storage is not a quick, simple sell, which PV is in comparison. For instance, are end-users interested in maximising self-consumption, in which case they might opt for a bigger system, which adds cost, or are they interest in maximising economics?’ comments von Versen.

Features and benefits

This makes laying claim a having a best product on the market tricky to judge. Von Versen advises installers to look for systems that are fully accredited and certified and those that can provide data on performance based on systems in pilot schemes, trials and early rollouts, can help when deciding which to choose from.

Sustainable energy’s bi-directional low voltage inverter for PV and storage systems.
(Source: Sustainable Energy)

The supplier E3/DC is taking the Apple approach by designing a smart storage system that is as consumer-friendly and is designed to make its use and operation simple and engaging. The system adjusts the load for all electric appliances in the house. E3/DC and Voltwerk are two examples of companies that have developed systems that allow the user to monitor the energy storage system via a specially design smartphone ’app‘ or over the internet. Dispatch Energy’s Black Diamond storage system, available in 5 kWh and 3.5 kWh capacities, sports a sleek design that will appeal to higher net-worth households, as it uses a newer Li-ion technology where the batteries virtually last the lifetime of the PV panel, even with 100% depth of discharge (DoD), without needing replacing.

Other suppliers have developed modular smart storage systems so the system’s storage capacity can be increased if the household needs to increase its electricity consumption. For instance Varta’s Engion allows a household or other end-user to expand storage capacity from 3.7 kWh up to 13.8 kWh, which can increase self-consumption up to 70% or even more. The smallest Engion size starts at about EUR11,800. The system is designed as a modular product that can be added to with more battery packs, at any time, to suit the customer’s individual requirements. The three product packages can be adjusted individually by increasing the numbers of modules. Engion has been in serial production since earlier this year. Prosol’s smallest system, which has a storage capacity of  4.6 kWh, is EUR11,500 plus VAT and installation costs. The company supplies the system in six different capacity sizes, up to 41 kWh.

Earlier this year, IHS Inc conducted an inverter buyer survey to establish what the market would be willing to pay for PV and storage systems. The questions were answered by a range of installers, integrators, wholesalers, distributors and project developers in terms of what these players would expect households and other end users to accept as an additional cost. More than 60% of respondents stated that the acceptable system price increase as a result of storage integration should be 10-29%. Nevertheless, there were also a good 30% who stated that paying more would be reasonable, according to IHS Inc. Many of the systems available are at the premium end of the market, developed to use Li-ion batteries, as opposed to cheaper lead-acid technologies.

Twenty years is a long time so any smart storage systems that can allow easy expansion of the battery storage capacity, to adapt to the changing energy demands of a household over time, can be expected to be popular as this market grows in the years ahead.


Reprinted with Permission

Author: Sara Ver-Bruggen 

Article is published in Vol 1, Issue 3 of Energy Storage Journal

To receive the next issue of the ESJ free of charge please register at www.energystoragejournal.com   



The content & opinions in this article are the author’s and do not necessarily represent the views of AltEnergyMag

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