Residential Batteries are Establishing their Role in European Countries

Posted by Karolis Mirinavičius

Recent Development

The residential battery market in Europe is experiencing a rapid evolution, propelled by key factors including technological advancements, policy changes, rising electricity prices, and heightened awareness of sustainability.

In 2023, Europe saw the installation of over 17 GWh of new battery energy storage system (BESS) capacity, marking the third consecutive year of doubling the annual market. The significant growth was primarily fueled by the residential sector in response to the energy crisis. During the same year, one-quarter of newly installed residential photovoltaic systems in Europe were paired with energy storage systems.

Source: SolarPower Europe.

Germany leads residential storage installations in Europe. In 2023, the country installed 555,000 units of residential energy storage systems. This marked a remarkable 166% year-on-year growth. These installations constituted 52.6% of new installations across Europe.

In Germany, homes with a PV-battery system are on average 70% self-sufficient. In 2023, approximately 79% of all new PV installations were combined with a battery storage system. 82% of newly installed batteries were paired with a hybrid inverter, enabling efficient management of both solar energy generation and energy storage.

Technological Advancements

Lithium-ion batteries continue to be the most popular choice due to their high energy density, long lifespan, and decreasing costs. Ongoing improvements in performance and safety are also driving their widespread adoption.

Lithium-ion batteries provide 2,000-5,000 cycles, whereas lead-acid batteries typically last 300-1,000 cycles. Although Li-ion batteries have a higher upfront cost, their true cost is significantly lower than lead-acid batteries when considering their lifespan and performance. The cycle cost of lithium-ion home batteries is 0.14-0.40 €/kWh, whereas for lead-acid batteries, it remains at 0.60-0.70 €/kWh. Currently, the most popular brands of home batteries in Europe include Tesla, LG Chem and Sonnen.

Emerging technologies like solid-state batteries and flow batteries promise even better performance and safety. Solid-state batteries, for instance, offer higher energy densities and are less prone to fire risks. However, several significant challenges in manufacturing, material stability, cost, and durability are preventing them from dominating the market.

Policy and Support Mechanisms

The European Union's Green Deal and related initiatives seek to advance renewable energy and energy storage solutions, bolstering market growth. Energy Performance of Buildings Directive (EPBD) mandates that both residential and non-residential buildings eliminate on-site emissions from fossil fuels by 2028 for publicly-owned buildings and by 2030 for all other new buildings. Heating will transition entirely to electric, resulting in increased electricity consumption, prompting the adoption of cost-saving measures. The EU Climate targets are also based on the integration of renewable energy sources into the grid. This will necessitate the development of additional energy storage capacity, whether at grid scale, household level, and through aggregation.

Several European countries provide incentives and subsidies aimed at promoting the adoption of residential batteries. These incentives encompass tax refunds and grants. In Germany, homeowners can receive financial assistance for energy storage systems. The program covers 25% of the total investment cost. Italy has introduced the Superbonus as a tax credit program, enabling residential users to deduct expenses associated with the installation of residential solar power facilities and battery storage systems. This scheme offers a subsidy of up to 70%. The UK government has removed VAT on domestic BESS installations and retrofits. The Smart Export Guarantee has also been introduced, which is a support mechanism that ensures people that generate their own electricity are paid for the electricity they export to the grid. In Poland, the Mój Prąd (meaning My Electricity) programme has been expanded to include funding for home energy storage in addition to solar PV panels.

Regulatory Frameworks

Changes to billing mechanisms and feed-in tariffs in European countries are enhancing the appeal of residential batteries. Overall, there is a shift towards adopting net-billing and reducing feed-in tariffs for prosumers, which facilitates sustainable energy solutions. In Germany, homeowners can receive payments for the electricity they feed into the grid under the EEG (Renewable Energy Sources Act). However, feed-in tariffs have been decreasing, and from 2024 onwards will continue to decrease by 1% every six months. In the UK, companies such as Octopus Energy are introducing smart tariffs designed specifically for households equipped with battery storage, even in the absence of solar panels.

Market Dynamics

The increasing electricity costs in numerous European countries are rendering residential batteries more financially advantageous. They enable homeowners to store energy during off-peak periods and utilize it during peak hours.

The expansion of residential solar installations throughout Europe is fueling the need for battery storage. Homeowners who have installed solar panels are increasingly interested in combining them with batteries to optimize self-consumption and reduce reliance on the grid.

Consumers are increasingly motivated to achieve energy independence and reduce their carbon footprints. Residential batteries empower households to rely more on renewable energy sources, aligning with larger sustainability objectives.

The price of residential batteries is steadily decreasing, broadening their accessibility to a wider spectrum of consumers. Factors such as economies of scale, advancements in manufacturing, and heightened competition are pivotal in driving this trend.

Manufacturers are introducing increasingly sophisticated and adaptable battery products. Innovations encompass modular systems that can be expanded with ease, integrated solutions featuring inverters, and comprehensive systems combining solar and storage functionalities.

Prospects for the Future

The outlook for residential batteries in Europe appears bright, with anticipated growth in the years ahead. Key factors driving this expansion will include ongoing technological advancements, support policies, regulatory framework, rising consumer awareness and demand for sustainable energy solutions.

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