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Reflections on the European Energy Storage Market

1. High-speed development of household energy storage

The European energy storage market has grown significantly over the past decade, with a rapid increase in the number of new installations installed each year. In 2011, the only 4MWh of new devices were installed in Europe, and the energy storage market was beginning to take shape. In 2019, the number of new installations jumped to 1,672 MWh, an 83.74% year-on-year increase from 2018.

As European countries accelerate the adjustment of energy structure, the domestic energy storage market is developing rapidly. Europe is now the world’s largest market for home energy storage. According to data from SolarPower Europe, the new installed capacity of home energy storage in Europe reached 745MWh in 2019, a year-on-year increase of 57%; The accumulative capacity reached 1997MWh, an increase of 60% year on year.

Germany is the European market leader in home storage, accounting for 66% of new installations in 2019. Despite the impact of COVID-19, Germany’s domestic energy storage market will still maintain good growth momentum in 2020Q1, with the cumulative installed capacity about to exceed 1000MW.

2. The “photovoltaic + energy storage” mode increases the scale under its economic advantages

In Europe, there are mainly three types of electricity consumption schemes on the user side: full grid purchase: no rooftop photovoltaic and energy storage systems are installed, and electricity demand is completely purchased from the grid. W only installs photovoltaic system without energy storage system: spontaneous self-use only accounts for 20-35%. When photovoltaic power generation is high at noon, the excess power is sold back to the grid; at night, when photovoltaic power is not working, part of the power is bought back from the grid. “Photovoltaic + energy storage” supporting use: the proportion of self-use should be increased to 60-90%, and the surplus electricity at noon should be sold back to the power grid.

With the rise of residential electricity prices in Europe, the cost of optical storage is declining, and the supporting economy of optical storage is becoming increasingly significant. In Germany, Italy, Britain, Switzerland and other developed countries in Europe, the cost of electricity purchase is high and shows a trend of continuous rise. In Germany, for example, the cost of household electricity purchase has increased from 28.7 euro cents /kWh in 2015 to 30.5 euro cents /kWh in 2019 and is expected to continue to rise in the future. At the same time, the LCOE of photovoltaic and “photovoltaic + energy storage” continues to decline, and the economy of photovoltaic supporting mode and self-use mode of electricity is becoming more and more significant.

In addition, the “PV + energy storage” model provides more flexibility and facilitates the emergence of innovative business cases in optical storage. The combination of different devices and virtual power plants (VPP) brings more ways to create value in the home energy storage market.

3. The introduction of diversification policies promotes the development of optical storage in Europe

In 2019, the European Union issued the CEP(Clean Energy Package) plan, which put forward the latest framework of European Energy policy. The CEP plan includes eight legislative bills and measures aimed at promoting the clean energy transition, with Regulation 1919/943 and Directive 1919/944 specifically stating that they will strongly support the development of the domestic energy storage market and remove possible financial obstacles to its development. In addition to the CEP program, countries have introduced diversified policies to promote the development of domestic energy storage. Common policies include direct financial incentives for end consumers, tax breaks for energy storage systems, funding for comprehensive building retrofits, and low-cost home energy storage systems. Among them, cash subsidy is the fastest and most direct way to support the deployment of home energy storage systems. By reducing the installation cost of the energy storage system, photovoltaic customers are encouraged to support the energy storage system.

The practice has shown that the incentive effect of the fixed subsidy (e.g., EUR 2000 / optical storage system) is not good. The more effective subsidy can be divided into the benchmark and variable parts based on capacity (e.g., EUR 200 /kWh). At present, Germany, Italy, Austria, Belgium, and other countries are implementing the policy.

In addition, in the early stage of photovoltaic industry development, European countries introduced a large number of subsidy policies to promote the rapid development of the industry. Common policies include feed-in tariff (FIT) policy and net-metering (NEM) policy. As the photovoltaic industry continues to mature, the European electricity market is gradually developing from policy-oriented to market-oriented, and the FIT and NEM policies of various countries are gradually expired or reduced. The promotion and application of energy storage can reduce the industry’s dependence on the photovoltaic subsidy policy, and the “photovoltaic + energy storage” model is expected to be further promoted.

4.Germany is one of the most mature countries in the development of user-side energy storage, of which home energy storage is the main component of the German energy storage market.

According to BNEF and Solorpower Europe statistics, the newly installed capacity of energy storage in Germany in 2019 is 910MWh, among which the newly installed capacity of household energy storage reaches 496MWh, accounting for 54.51%. The main reasons for the mature development of the domestic energy storage market in Germany include the high proportion of renewable energy generation, the overall increase in residential retail electricity prices, and the shift of photovoltaic subsidies to domestic energy storage:

Renewable energy supply continues to increase, promoting the development of the energy storage market. In 2010, the Federal Government of Germany issued the “Outline of Energy Planning” to promote the development of the energy transformation strategy. In recent years, Germany’s renewable energy power generation shows a gradual upward trend, reaching 333,200GWh in 2019, accounting for 53.9%. With the increasing proportion of renewable energy in the power supply and the strengthening of power grid volatility, energy storage will help maintain the stability of the power grid and guarantee the quality of power consumption and development together with renewable energy.

The cost of buying electricity for households is high and the retail price of electricity for residents is rising. In 2020, the retail electricity price for residents in Germany is $0.38 /kWh, which is the highest among major countries in Europe. The average electricity price in Germany in 2019 is 1.55 times that of 2006, of which the renewable energy surcharge increased from 0.88 euro cents /kWh in 2006 to 6.41 euro cents /kWh in 2019, an increase of 7.28 times. With the rising price of electricity in the future, German residents will gradually increase the proportion of self-use electricity, and household energy storage will be further developed.

PV FIT declined year by year, and the subsidy policy shifted to household energy storage. The subsidy for grid connection in Germany has decreased significantly since 2009. Taking residential roof projects with an installed capacity of less than 10kW as an example, the subsidy price for grid connection has decreased from 0.43 euros /kWh in 2009 to 0.24 euros /kWh in 2012. At the same time, the German Bank for Reconstruction and Development, through the KFW275 program, provides subsidies for the existing and new photovoltaic users to support energy storage, to promote the spontaneous use of German residents, and reduce the cost of electricity. Under the guidance of the energy transition and the EU’s carbon-neutral target, the German power system is moving towards a higher proportion of new energy sources. In the future, the booming user-side energy storage will support the flexibility of the power system. At the same time, the perfect policy and market mechanism will also drive the German energy storage industry to glow with new vitality.

5. Inspiration: The mature experience of the European market is worth learning from

We believe that the European energy storage market is booming for the following three reasons: · Proactively tap the flexible power resources to meet the challenges of a high proportion of consumption. The proportion of renewable energy generation in major European countries is relatively high and constantly increasing. To ensure the stability of the power grid and the reliability of the power supply, various countries are actively exploiting flexible resources and giving full play to their regulatory capacity. When traditional means such as coal power and gas power cannot fully meet the challenges, new energy distribution and storage becomes a good solution, and the energy storage market develops rapidly with new energy.

· Higher marketization of electric power and strong flexibility of electricity price system. The European Union is the forerunner in the reform of electricity marketization. After 20 years, the degree of electricity marketization in Europe has reached a high level. In a liberalized power market, energy storage resources can participate in the spot market, auxiliary service market, and other power markets and obtain profits. With the continuous progress of the European electricity market, the energy storage system will continue to develop towards commercialization. Taking Germany as an example, the clearing price adjustment mechanism in the spot market of electricity is conducive to the development of flexible resources. The price of electricity in the spot market tends to be inversely proportional to the surplus of electricity generated from clean sources. When the scene output is insufficient and the spot market clearing price rises, the flexibility resource benefits from its quick response-ability and will quickly respond to improve the output at the second level and the minute level to achieve better profits. Therefore, the commercial maturity of building flexible resources will be greatly enhanced, and energy storage will be developed as a high-quality flexible resource.

· Policy subsidies promote the continuous development of the energy storage industry. Policy subsidies play a very important driving role in the early development of the industry. With the continuous maturity of photovoltaic technology and the increasingly clear market-oriented orientation, European countries have successively weakened photovoltaic subsidies and gradually shifted to the energy storage market to promote the rapid development of the energy storage market. In the future, with the further increase of PV penetration and PV storage distribution penetration, the European energy storage market will have a bright future. According to Solorpower Europe, the European home storage market will see more than 1GWh installed by 2023. Seen by segment, Germany, Italy, and the United Kingdom will all be booming home energy storage markets.

At present, China’s energy storage market has gone through the phase from 0 to 1 and is developing from 1 to infinity. With the “30·60” target proposed, how to deal with the development of renewable energy has become an important issue. At the same time, the government proposed to deepen the market-oriented reform of electricity and actively deploy energy storage policy subsidies. Based on its national conditions, China should learn from the mature experience of the European energy storage market and promote the development of China’s energy storage market.

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