Tread carefully if you are thinking of selling residential energystoragein Germany. Even if “the demand for solar batteries has increased significantly,” as the German Solar Industry Association (Bundesverband Solarwirtschaft or BSW-Solar) says, it’s a tough market to compete in, according to insiders.
“This is far from making money. It is not a market to print dollars,” said Andreas Piepenbrink, CEO and managing partner of E3/DC, a German residential energy storage system developer. The company, which has taken a page out of the Tesla and Nest Labs playbook with a sleek design for its home energy storage products, sold 800 units last year.
This year E3/DC is hoping to shift a further 1,500 systems, giving it roughly 12 percent of the German market. The demand for energy storage is growing even though residential PV sales are down. In 2014, about one in five household PV systems were sold with a battery pack.
In 2015, sales of residential PV systems are expected to fall from about 50,000 to 40,000. But the proportion with storage will grow by 50 percent, to nearly one in three. That should take the number of residential battery systems up to 13,000, according to EuPD Research figures quoted by Piepenbrink.
German consumers are increasingly attracted to solar plus storage because it makes financial sense. Household electricity prices are among the highest in Europe, at around €0.30 ($0.32) per kilowatt-hour. Perversely, however, wholesale energy prices are so low that they are killing utilities.
What this means is that people with household PV are better off investing in batteries to save excess energy for self-consumption than they are selling it to the grid. The cost of combined PV-and-battery systems runs from about €13,000 to €25,000 ($13,800 to $26,600). Batteries make up about 30 percent of the total bill.
Battery costs fell by about 25 percent in the second half of 2013, prompting a 32 percent jump in financing requests, according to BSW-Solar. To buy the systems, homeowners can get a low-interest loan from KfW, a German government-owned development bank, plus up to a 30 percent rebate on the purchase price. There is no sales tax on the purchase.
That brings the payback time down to around 14 years. “There isn’t a super return but that is enough for some people to do it,” said Piepenbrink.
German consumers are hardly getting great rates on bank savings, he pointed out. So they are more inclined to put their money into ways of cutting household costs. “It’s like insulating your house,” he said.
Such conditions ought to be a boon for companies like E3/DC. But even with incentives, said Piepenbrink: “It’s not easy to pull €20,000 out of the pocket of a household.”
And the market is close to saturated. About 70 percent of German PV installers are now offering storage as an option. On top of that, there 30 to 40 technology resellers and distributors. Up to around 70 percent of the players, backed by venture capital or part of much larger businesses, might be selling at a loss to build market share.
As such, it’s no surprise that even companies with big brand awareness, such as the embattled inverter maker SMA, are finding it hard to carve out a significant niche. To make matters worse, German utilities such as RWE and E.ON have also started commercializing solar-and-storage packs, having apparently decided on an ‘if you can’t beat them, join them’ approach.
Thankfully, there are some signs that things could improve for Germany’s energy storage vendors in the coming months. Besides the general growth in the market, there is a growing need for companies that can offer integrated systems and high-quality services.
Currently, very few vendors other than SolarWorld provide anything resembling an integrated PV-and-storage bundle. And only about 30 companies are skilled enough to be able to give consumers precise self-consumption-rate and return-on-investment calculations. With the rest, homeowners take the risk of an oversized or undersized storage setup.
Elsewhere, growing interest in heat pumps seems likely to give the market a further boost, with some sources citing a potential demand of 200,000 units a year. Finally, there’s the enduring promise of electric vehicles bolstering demand for home energy storage.
However, electric vehicle adoption in Germany is slower than in European nations such as the Netherlands. So any impact on energy storage sales will likely not be felt for a number of years. For the time being, the companies competing for Germany’s residential energy storage customers have to grin and bear it.
“Only very few players can establish themselves in the market long-term,” predicted Piepenbrink. “It’s not an attractive market.”