Planned cuts to energystoragesubsidies in Germany have been reversed -- for now.

In November, the German government decided to end a 30 percent credit for energy storage systems by the end of this year. But Germany’s Green Party now says the subsidy will continue in some form. Currently, state assistance also includes low-interest loans, in addition to the credit. 

It's still unclear how long the domestic storage subsidy will be available. The Green Party is pushing for three more years.

The extension is very welcome news for companies selling small-scale energy storage in Germany. The subsidy has been instrumental in fueling uptake of battery storage, from almost nothing two years ago, to as many as an estimated 13,000 units in total by the end of this year.

The subsidy, which is provided by the federal government via the German state-owned development bank KfW, was originally created in May 2013 to encourage the uptake of solar-plus-storage.

According to the Federal Ministry of Economic Affairs and Energy, that goal had been met. The subsidy was so successful, argued the ministry, that it was no longer needed. So why the sudden change of heart?

The German government hasn't fully explained. But several studies projected a steep drop in domestic storage without the credit.

EuPD Research predicted that, after a final rush to install systems at the end of the year, growth in the home storage market would diminish by 13 percent in 2016. It predicted the market would worsen in 2017.

Another motivation for the policy shift could have been the negative impact on the domestic solar industry. Feed-in tariffs for new installations have already been slashed, making the home-consumption model of storing excess solar electricity -- rather than selling it to the grid -- a more attractive model for new solar adopters. Without the 30 percent credit and cheap loans, customers may think twice before investing in any form of solar.

At present, just under 14 percent of all new PV installations include storage, according to a report by Germany Trade and Invest.

In its industry survey, EuPD found that only 20 percent of consumers considering solar are not considering storage as part of the package.

For now, the continuing subsidy, the increasing attractiveness of home consumption, and falling battery prices will ensure Germany's storage market continues growing.

Although still a minor factor in the overall storage picture in Germany, domestic units have large aggregate potential, explained Dr. Volker Quaschning of the University of Applied Sciences for Engineering and Economics in Berlin.

“If all suitable households get a solar system and a battery, the storage capacity will exceed the capacity of all existing pumped storage power plants in Germany," he said.

According to the U.S. Department of Energy’s storage database, that’s around 6.5 gigawatts of storage.

But there are still obstacles for large-scale storage in Germany, where market rules are not fully developed.

According to Quaschning, grid-scale storage is considered a consumer of electricity, meaning that both the storage operator and then the subsequent consumer have to pay the country’s EEG-Umlage, a renewable energy surcharge. So essentially, the energy gets taxed twice.

Miriam Hegner of the Bundesverband Energiespeicher (BVES), a German energy storage association, is also calling for an end to the double tax system. “Energy storage is different,” she said. “Energy storage is not an energy consumer or prosumer -- it’s an entirely unique case.”

Germany is clearly committed to encouraging domestic storage. However, there are still many uncertainties for policy in the residential market and rules on the grid level.