How to Make Battery Energy Storage Attractive to UK Customers
Costs for residential battery energy storage in the UK remain too high. For storage to enter the mass market, suppliers have to innovate their customer propositions and business models. This is the conclusion of new research from Delta-ee’s Energy Storage team.
The research shows that the payback for a newly installed PV + battery storage system is more than 16 years. Julian Jansen, manager of the Delta-ee Energy Storage Research Service, says “with PV + battery storage having been talked up to be the future of the UK’s residential PV market, finding ways to reduce this payback and make storage more attractive to customers is crucial to grow the market.”
The chart above shows the results of Delta-ee’s in-house modelling profiling end-customer payback periods for a PV system (4kWp) combined with a typical 3kWh Lithium-ion battery storage product, today and in 2020. The payback improves by 2020 but remains over 10 years despite the forecast reduction in storage system costs. “We expect prices for energy storage systems to fall by around 10% annually”, explains Julian Jansen, “but even by 2020 this may still not be sufficient to allow the UK market to grow above 15,000 units p.a.”
In contrast, the market in Germany is already above this level – as the result of a combination of subsidy, higher electricity prices and a bigger PV market. But Delta-ee’s research also shows that in Germany new business model approaches are being established, and that these approaches will be needed in the UK to reduce customer paybacks below 5 years* – the point at which mass market potential becomes realistic. Delta-ee identifies two key options:
Pay customers to allow third party control of their battery. Typically this involves the third party aggregating many residential batteries and bidding into ancillary services markets. However, in order to achieve a payback for customers of 5 years in 2020, Delta-ee’s modelling shows that customers will need to be paid around £500 per year. To put this into context, UK technology developer Moixa is currently offering payments of £75 p.a. to customers, although in Germany Fenecon / Ampard are already offering customers €400 p.a. (c £320).
Innovative financing approaches, such as leasing / rental models. In this case the customer pays a monthly fee and a utility or third party can take control of the battery systems at times to earn additional revenues. Thereby the upfront cost barrier for customers is removed and lifetime costs to the customer are considerably lower than if based on an outright purchase of the battery. There are fewer examples to date of this approach, examples including the US Vermont utility Green Mountain Power or German regional utility Entega.
Ultimately, the three factors Delta-ee have identified – cost reduction, additional revenue streams for customers and innovative financing – will all play a role in bringing residential energy storage into the mass market in the UK.
