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I spent the other day at Intersolar in Munich, a solar trade fair which used to be the biggest in the world. Today, it is a half the size of what is was some year’s back which says a lot about the state of the European solar market. The reality is that the big markets are China, US and Japan and unsurprisingly those are the countries with the biggest solar trade fairs!
The halls which housed the Yinglis, Trina Solars and the other solar module manufacturers were more or less empty; at least they were in comparison to some years back when the stands were buzzing with customers and interested parties. That all said there was excitement but it was not around solar, instead it was around energy storage and in particular batteries.
There was Tesla and Sonnenbatterie with their residential behind the meter battery solutions, and a whole pile of lead acid battery suppliers. But the crowds were around Daimler and the Quandt family (BMW’s major shareholder) owned Solarwatt both of whom presented their new residential battery solutions. These solutions are fully aimed at Tesla’s Powerwall which is expected to be available in the US in September and Europe early next year. Meanwhile Daimler’s and Solarwatt’s solutions are available now! Which is a good thing given that the German market is one of the few markets where this solution currently makes economic sense!
Two factors make the German market interesting, the first is that it is high price power environment with residential consumers paying €0.30 ($0.34) per kWh for electricity with a solar tariff of just over €0.12 ($0.13) per kWh for feeding that power into the grid. This means that there is a €0.18 ($0.21) per kWh incentive to use that electricity in the home rather than feeding it into the grid. In addition, the German government offers a 30% capital grant as well as low interest loans. Despite these economics the payback period is circa 10 years. California is also a very interesting market thanks to the the Self-Generation Incentive Program (SGIP), which can provide up to 60 percent of total project costs for eligible storage systems. But if it was not for these programs payback periods would be 30 years or so!
For the the automobile manufacturers Daimler and Tesla, the residential market is an interesting additional market for the batteries they are producing for their electric vehicles. It is also superb marketing and it is a very high margin business as complete systems including installation cost are well over €1,000 per kWh when the battery production costs of Tesla and Daimler are in around €300 per kWh. But the reality is for the market to really kick off costs and prices will have to fall. The good news is they will. New entrants are coming into the market which should create competition. In addition, battery production costs will fall by half over the next five years as will balance of systems costs. There are also optimizations possible across the whole value chain from installation to power electronics. Currently, for instance, a solar system which connects to a domestic battery needs two inverters, one for the solar system and one for the battery system. Going forward we will combine them into one unit. Add a charging station for an electric car and we have yet another inverter which again will eventually be combined into one solution which enables the grid, solar panel, car and storage system to speak to each other and move power more efficiently and effectively between them. That may be complex but such solutions will come and will drive the costs of these systems down, making them within the grasp of more and more customers. In a nutshell, we are at the beginning of a very exciting journey.