Germany Finances Major Push Into Home Battery Storage For Solar

by Giles Parkinson

As the level of renewable penetration rises to 40 percent in Germany within the next 10 years, in-home and in-business battery systems are expected to experience rapid growth.
As the level of renewable penetration rises to 40 percent in Germany within the next 10 years, in-home battery systems are expected to experience rapid growth.

Originally published on RenewEconomy

The German government has responded to the next big challenge in its energy transition – storing the output from the solar boom it has created – by doing exactly what it has successfully done to date: greasing the wheels of finance to bring down the cost of new technology.

Over the past five years, Germany has been largely responsible for priming an 80 percent fall in the price of solar modules. Now it is looking at bringing down the cost of the next piece in the puzzle of its energy transition – battery storage.

At its disposal is the giant state-owned but independently run development bank KfW. It performs in the clean energy space a similar function to Australia’s recently created and imminently doomed Clean Energy Finance Corp, but at such a scale that is not contemplated in most countries, possibly with the exception of China.

It has assets of more than €500 billion, and lent €73 billion last year – with one-third of that targeted at renewables and climate investments. Over the past three years it provided €24 billion in loans for energy efficiency investment in homes, leveraging a total investment of €58 billion, helping insulate and seal more than 2 million homes, employing 200,000 people a year and saving more than 150 million tonnes of carbon.

Six months ago, it began a new program to finance the introduction of battery storage into homes and small business, which it says is absolutely essential if the “energiewende” the German expression for its energy transition – is to successfully move to the next phase and beyond 40 percent renewable penetration.

The energy storage financing program has generated a higher than expected response. Already 1,900 homes and small businesses have put their hands up for loans and grants (provided by the Environment Ministry) to install new solar systems and a battery storage system in their home. Around €32 million in loans has already been allocated and €5 million in grants, about 10 percent of the sums allocated in the initial phase of the program.

Unlike the subsidised uptake of solar PV enabled by the deployment of generous feed-in tariffs, the support mechanism for energy storage is more cautious. Indeed, KfW is looking for investors who are willing to take a loss on their investment.

“The market for energy storage systems is very young  … batteries are still very expensive  … and the economics don’t yet work,” program manager Dr. Holger Papenfuss, told RenewEconomy in an interview in KfW’s sprawling headquarters in Germany’s financial centre of Frankfurt this week.

In fact, even with the assistance of the loans and grants, it is still not economically viable. Which is why KfW has stepped in to ensure that the commercial banks provide the funds for development.

The program is relying on “early adopters” and “renewable pioneers” – the same profile that were the first to get into electric vehicles, or solar panels a decade ago – who have the money and are willing to accept a negative return on their investment. Right now, Papenfuss says, people would be better off selling power to the grid.

So what’s motivating them? Being independent of the large power producers, and hedging bets in the face of rising electricity prices.

According to Papenfuss, households will spend between €20,000 and  €28,000 on solar and battery, depending on the size of the system. The battery component – it is targeting lead acid and lithium-ion batteries – is between €8,000 and €12,000, and the grants for this average around €3,000 (or about 30 per cent of the battery cost).

The average loan for the whole system is around  €17,000, but it is not offered at a discount. At just 1.5 percent, the interest rates probably don’t need to come down any lower in any case. KfW’s function is to simply ensure that funds are made available for deployment by commercial banks, who may not touch an unprofitable venture otherwise.

Papenfuss says KfW is targeting 20,000 to 30,000 under its loan program, suggesting a commitment of at least €300 million.

KfW’s aim, according to Axel Nawrath, a member of the KfW Bankengruppe executive board, is to ensure that the output of wind and solar must be “more decoupled” from the grid. Which means that the grid is not necessarily required to accept the output just because the wind happens to be blowing a lot at the time, or the sun is shining.

“The success of the energy turnaround will entirely depend on integrating electricity from renewable sources into our energy system on a reliable, permanent basis,” he said in his announcement earlier this year.

Storage means that the energy output can be held in reserve. The idea is to even out the peaks and troughs which is making it difficult for other generators to stay in business. This is seen as critical as the level of renewable penetration rises to around 40 percent – a level expected in Germany within the next 10 years.

In a perfect world, the output might look something like this graph below, as illustrated  by Citi in a recent analysis. It would spread solar and even wind output through the day, and cause less headaches for the other plants required to fill in the gaps between the variable output of wind and solar.

citi-storage (1)
Citi energy graphic shows the disrepancy between energy generation profiles with and without battery storage.

According to Papenfuss, households participating in the scheme will spend between €20,000 and €28,000 on solar and storage, depending on the size of the system (the average size is expected to be around 7kW for the solar array and around 4kWh for the battery).

The battery component is between €8,000 and €12,000, the grants average around €3,000 (or about 30 percent of the battery cost) and the average loan for the whole system is around €17,000.

The program is not open to systems of more than 30kW, and nor is it open to solar arrays that were installed before December 31 last year. They are deemed to have already gotten a good enough deal from the FiT’s.

Papenfuss says that to make sense, battery storage needs to be half the cost it is now. This program is designed to set that price fall in motion. He expects the costs to start to fall in 2014, and within two years could be offering a positive return. At that point, he says, the grant component is likely to be withdrawn, although the loan finance program will likely continue.

Over the longer term, KfW hopes that the program will help define standards for use of storage systems.  Papenfuss expects storage systems to then focus on wind power and other larger solar systems – allowing owners to earn a fee for storing energy and releasing it at certain times.

(Editors note: Rather than listening to the new Australian parliament debate climate change and clean energy, RE’s editor has chosen to flee, at least temporarily, to Germany, where he has discovered most politicians believe that planet Earth is, in fact, round. This is the first of a series of articles on Germany’s energiewende, its energy transition that will likely have  a major influence on the pace of change in the rest of the world. Many want it to succeed, some want it to fail).

Repost.Us - Republish This Article

This article, Germany Finances Major Push Into Home Battery Storage For Solar, is syndicated from Clean Technica and is posted here with permission.

About the Author

Giles Parkinson is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia’s energy grid with great interest.

Why The Hot Money Is Chasing Energy Storage

by Giles Parkinson

Originally published on RenewEconomy

What do Bill Gates and Warren Buffett have in common? Apart from being very, very rich, it is a growing interest in battery storage and other “smart” technologies that will redefine the way our electricity grid operates – hopefully to the benefit of the consumer.

Gates has built up a collection of energy storage investments – including Aquion Energy, Ambri, and LightSail – and Buffett is a major investor in Chinese electric car and battery developer BYD, soon to unveil a home battery storage solution in Australia.

Last week, Gates and well-known cleantech investor Vinod Khosla last week bought into Varentec, a US company that is developing “smart” technology that will link storage devices and renewables, and lead to what Khosla describes as “cost-effective, intelligent, decentralized power grid solutions.”

Energy storage, as described by investment bank Citi in its new Energy Darwinism report, is likely to be the next solar boom. Citi says the main driver of this investment will not be just to make renewables cost competitive, because they already are in many markets – but for the need to balance supply and demand.

This, in turn, will make solar and other renewables even more attractive. It may even mean the end to the domination of centralised utilities, as storage will allow the industry to split into centralised backup (based around the old rate-of-return regulated utilities model) and much smaller “localised” utilities that harness distributed generation such as solar and storage.

This could be deployed even on a “multi street” basis, Citi says. (Yes, Grant King, the Sydney suburbs of Pymble and Gordon could go off-grid – see our interview with the Origin CEO here). In Germany, some small towns are doing just that, and Citi notes that KfW, the German development bank that kicked off the solar boom 10 years ago, has now begun an energy storage subsidy program.

This presents yet another challenge for generators, which are being displaced by the huge impact of solar generation in markets such as Germany, and in Australia too.

“If, as we expect, storage is the next solar boom and becomes broadly adopted in markets such as Germany, the electricity load curves could once again change dramatically causing more uncertainty for utilities and more disruption to fuel markets,” Citi notes.

This could be good news and bad news for generators and network operators. The first graph (figure 26) shows what is happening to baseload generation on sunny days in Germany with lots of solar. Similar impacts are being felt in Australia and the US. Baseload generation is squeezed out, but flexible gas generation finds a role.

With storage, this evens the output of solar. That’s bad news for flexible gas, because it is no longer needed as much, and while the overall level of baseload is reduced, at least it is fairly consistent.

“So, solar initially steals peak demand from gas, then at higher penetration rates it steals from baseload (nuclear and coal) requiring more gas capacity for flexibility, but then with storage, it benefits baseload at the expense of gas,” Citi writes.

“Who would want to be a utility, with this much uncertainty?”

Citi says that while energy storage is in its infancy, and subsidies will be needed for solutions that right now are still expensive and largely uneconomic, increasing amounts of capital are being deployed in the industry.

“Much of the historic investment in battery storage technology has been in the automotive sector given the development of electric vehicles. However, increasing efforts are being made elsewhere, most notably for the purposes of either small-scale residential storage (via the integration of Li-ion batteries into the inverters which convert solar electricity from DC to AC), or at a grid level.

It is important to note that while the holy grail for the automotive industry has been maximising energy storage capacity while reducing weight (electric vehicle batteries are enormously heavy, and thereby affect range, performance etc), at a residential or grid level, size and weight is far less of an issue.

The industry is still at that exciting (and uncertain) stage where there are many different competing technologies, and it is not yet clear which will emerge as winner(s).

At a grid level investments are being made into compressed air storage, sodium sulphur batteries, lead acid batteries, flow batteries, Li-ion batteries, and flywheels to name a few. These are all discussed in more detail in the report highlighted below.

So while storage is still very much a nascent industry, we should remind ourselves that this was the case with solar in Germany only 5-6 years ago. The increasing levels of investment and the emergence of subsidy schemes which drive volumes could lead to similarly dramatic reductions in cost as those seen in solar, which would then drive the virtuous circle of improving economics and volume adoption.” — Citi

Repost.Us - Republish This Article

This article, Why The Hot Money Is Chasing Energy Storage, is syndicated from Clean Technica and is posted here with permission.

About the Author

Giles Parkinson is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia’s energy grid with great interest.

.

Related Posts

ergon-map

Ergon Says Renewables And Batteries May Be Cheaper Than Grid

byd e6 back

South America’s Largest EV Taxi Service

isothermal CAES

New Compressed Air Storage Deals Fatal Blow To Zombie Lies About Wind And Solar

Ambri leadership team

Ambri Update: Ambri Publishes 2013 Progress Report

Ergon Says Renewables And Batteries May Be Cheaper Than Grid

by Giles Parkinson

.

Originally published on RenewEconomy

Ergon Energy, which operates the sprawling, regional electricity network that covers 97 per cent of Queensland, has suggested that within the next decade renewables and battery storage will be cheaper for domestic consumers than grid power.

The operator of 160,000kms of power lines, and a million power poles, says it is moving away from the traditional “poles and wires” approach to investment, but it warns that current subsidies to the cost of centralised generation are delaying innovation and investment in new technologies and systems.

“Will we see a time in the next decade where renewables and battery storage will be cheaper than grid power for the domestic consumer?”  Ergon Energy chairman Malcolm Hall-Brown wrote in the company’s annual report. “Queensland’s current uniform tariff may delay some alternatives but innovation is definitely accelerating in the renewable market.”

The Queensland government spent $600 million in 2012/13 under its bridging the gap between the cost of delivering coal and gas fired generation to regional centres and what it charges consumers. That taxpayer-funded subsidy equates to $850 per customer.

Even with this cap on consumer bills, and the removal of the 44c/kWh feed in tariff,  Ergon Energy CEO Ian McLeod says increasing numbers of householders were looking to solar for certainty and control over costs.

“The network’s role is transitioning from a transporter of electricity to a market enabler, Our customers are increasingly becoming producers selling energy into the grid while changing their consumption behaviours to maximise their return on investment – 14% of households in regional Queensland now have solar,” he says in the report.

The Ergon Energy annual report came out on the same day as that of state-owned generator Stanwell Corp, which blamed the proliferation of rooftop solar for declining wholesale prices and causing it to run at a loss. It also came days after Energex, which looks after the network operations in south-east Queensland, blamed solar for making its economic model unsustainable.

The difference in tone in the reports of Ergon Energy and Energex could not have been more marked. Where Energex – and most other network operators in Australia for that matter, see only doom, Ergon Energy sees opportunity, in the same way as Vector in New Zealand.

“Like Bob Dylan’s immortal classic ‘The Times They Are a-Changin’ so is the purpose of the electricity distribution network,” McLeod writes in the annual report.

McLeod noted that capital investment and technology is now flowing downstream into the customer installations – away from traditional regulated infrastructure to unregulated solutions funded by customers or third parties.

“Alternative energy solutions will set a market-based benchmark in pricing as they become increasingly technically and commercially viable.

.ergon-household-use

“In this environment the network is no longer a monopoly as it delivers a single commodity that can and is already being supplied via other means. This change means our value proposition needs to shift to enable a strong market for energy, storage and demand management solutions, while still providing a safe, secure and reliable supply.”

McLeod recognised that half the cost of electricity in Queensland came from the investment in poles and wires, and the combined impact of higher prices, economic conditions, greater awareness of energy efficiency and the availability of technologies like solar had caused underlying and peak demand to fall significantly over the last three years.

Average household demand from the $12 billion grid that Ergon Energy operates fell 5 per cent in the past year alone, and by 15 per cent over four years, to 6,811kWh per household. Overall demand fell slightly, to 15,097GWh, but again was well below forecasts.

Ergon Energy says it has responded by cutting its spending program by $1.5 billion, has streamlined its workforce and had achieved significant peak demand reductions – and avoided infrastructure investment, through demand management and demand response mechanisms.

.ergon-solar-install

McLeod says Ergon Energy connected another 32,000 solar PV systems to the network, taking its total to 78,000 and the proportion of homes to 14 per cent. It now has 255MW on its network. Added to Energex total of 675MW, the 44MW of solar thermal to be added soon at Kogan Creek and additions in last two and coming months, that will take the state’s total to over 1GW.

McLeod says the rate of take-up of solar remains a challenge for the network operator, because “thin grids” are generally more vulnerable to voltage issues. “Historically, the network was not designed for electricity to flow intermittently in both directions,” he said.

Ergon was looking at technical solutions, but he noted the success of Magnetic Island, where the Solar City project had cut demand on the island by 16 per cent and deferred the need for a costly third submarine cable to the island by at least eight years. “The project demonstrated that a comprehensive community engagement program can drive real change to the benefit of customers, electricity utilities and the environment,” he said.

Ergon is also looking at electric Vehicles, which could create similar challenges to solar if sales of EVs suddenly escalated. It noted that a trial of using five Mitsubishi i-MiEVs in Townsville had shown that fuel costs were dramatically lower $4.81 per 100km vs. $11.54 for a petrol car), and had given valuable insight on appropriate tariffs to encourage charging at off-peak periods.

McLeod signalled that there was likely to be a change in tariffs, along the lines discussed in these pages,here, here, and here. “We see great opportunity in moving from charging largely based on the amount of electricity used to mechanisms that look at the capacity a customer requires from the network at any given time.”

The options include include mechanisms such as time-of-use tariffs, kVA denominated demand charges and critical peak pricing. Our aim is to spread the electricity load more evenly, manage growth in peak demand and avoid spending millions of dollars in asset augmentation or reinforcement; which would ultimately have been paid for by our customers.”

Despite Ergon Energy’s embrace of solar, new technologies, and new thinking, the annual report also revealed that it had invested little in renewables to meet the national renewable energy target.

It sourced only 7 per cent of its renewable energy obligations (Ergon also operates a retailer) through its own production, and bought renewable energy certificates to meet the remaining obligations. Most of these would have been bought from projects in other states. RenewEconomy has been told that Ergon Energy had been instructed not to invest in large-scale renewables (Queensland does not have any apart from the 20-turbine Windy Hill installation and some bagasse project, but has not been able to confirm that.

There was also surprisingly little renewable energy generation in remote areas not connected to the grid. Ergon used 712,658 gigajoules of diesel generation during the year, and only 671GJ – less than 0.1 per cent – from renewables.

.ergon-solar-domadgee

It says it is looking to increase its renewable capacity to defray the volatile diesel fuel prices and the environmental impacts. Interestingly, it is easier to defray fossil fuel costs in remote locations than on the main grid. A new 264kW solar PV system at Doomadgee (pictured) has been introduced without affecting stability and can be expanded to 2MW.

It is looking at increasing its wind generation on Thursday island, where two turbines supplement diesel, and it is still looking at options to replace its ageing geothermal power station at Birdsville.

While Ergon Energy’s attitude to the grid and new technology opportunities is welcome, and like a beacon in the smog in Australia, it is not entirely clear that it will be able to continue with this vision. The Queensland government has announced it wants to merge Ergon Energy and Energex and bring them under one management. Whether that single management structure reflects backward thinking or forward is not yet clear.

(Note: This story was corrected from first edition to say Windy Hill had 20 turbines, not four).

 

Repost.Us - Republish This Article

This article, Ergon Says Renewables And Batteries May Be Cheaper Than Grid, is syndicated from Clean Technica and is posted here with permission.

 

About the Author

Giles Parkinson is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia’s energy grid with great interest.

Related Posts

stanwell-capacity

Electricity Generator Stanwell Blames Solar For Fossil Fuel Baseload Decline

berkley-solar-vs-wind

Cost Of Solar Getting Competitive With Wind

Screen-Shot-2013-09-25-at-5.22.29-PM

Can Wave Energy Turbines Ever Make Money?

Citi-solar-wind-opportunity1

Will Australia Participate In $64 Billion Wind And Solar Boom