The global market for grid-connected residential photovoltaic solar installations coupled with energy storage is predicted to grow tenfold to reach more than 900 MW in 2018, up from just 90 MW in 2014, according to a new report from IHS Technology.
According to the report, the expanding opportunity for PV companies and battery manufacturers largely will be driven by the increasing attractiveness of PV for self-consumption, as well as by subsidies and increasing interest from homeowners in becoming more independent of the electricity grid.
Interestingly, the performance of the overall PV market has acted to prevent the energy storage market from taking off in line with expectations, IHS says. In particular, reduced government incentives coming in the wake of wider PV adoption levels are now serving to dampen many major residential solar markets where energy storage is likely to be adopted.
The high price of both batteries and the power-conversion devices needed to integrate them into PV systems has also remained a major inhibiting factor for the market. Although the average price of lithium-ion (Li-ion) batteries, which account for the majority of residential PV energy storage installations, is estimated to have fallen by 20% in 2014, price continues to be a major concern for the industry, IHS says. The result is that profitable business models for PV energy storage are complex and only exist in a small number of niches, where subsidies and strong interest from end users have enabled the market to grow.
‘In situations where a financial justification for adding energy storage to a residential PV system does exist, the business case is highly dependent on several variables, such as the levels of self-consumption that can actually be achieved and the development of retail electricity rates over the next 20 years,’ says Sam Wilkinson, research manager for energy storage at IHS. ‘The fact that these variables are impossible to ensure and so difficult to predict makes the investment relatively insecure and has further hampered end user appetite for residential PV energy storage.’
The overall picture, however, will improve next year, IHS says. Li-ion prices are expected to fall by a further 15% in 2015. Moreover, IHS forecasts that the residential PV market will return to growth for the first time in three years. These factors will be critical to spurring a 90% expansion in residential PV energy storage in 2015.
The principal driver will be the increasing attractiveness of self-consuming the electricity produced by residential PV systems, IHS says. In many cases where retail electricity prices are relatively high in comparison to the cost of generating PV, it is more financially attractive to use the electricity produced by a PV system and save money off the electricity bill than it is to sell electricity back to the grid.
PV markets where self-consumption is particularly attractive include Italy, Germany, the U.K. and Australia, IHS reports. These countries combined are predicted to account for more than 40% of the residential PV energy storage market in 2018, despite representing only 20% of total PV installations.
The largest market for residential PV energy storage in 2018 will be Japan, IHS says, with more than 200 MW of installations, despite generous PV incentives that make self-consumption of PV unattractive. In response to the country's electricity shortage, a subsidy has been released in Japan to promote the use of Li-ion batteries in residential and commercial buildings. This, combined with frequent electricity blackouts and a significant difference between peak and off-peak electricity prices, has generated huge interest in PV systems with energy storage attached.
In North America, which IHS predicts will become one of the largest residential PV markets in the world in 2018, backup is currently the only driver for PV system owners to add energy storage to their systems. As a result, IHS predicts that residential PV energy storage installations in North America will account for just 5% of the global market.
For more information on how PV generation and energy storage can be combined to create cost-effective residential power systems, visit the Hybrid Energy Innovations event website here.