After years of selling more expensive home battery systems, sonnen launched a new product Thursday to compete on cost with other mainstream options in the U.S. residential energy storage market.
The Germany-based company, acquired by oil major Shell in 2019, designed its sonnenCore system to deliver daily cycling for grid services as well as backup power. It comes with a capacity of 5 kilowatts/10 kilowatt-hours and a price point of $9,500. That puts it in competition with the similarly sized and priced LG Chem Resu and Enphase Encharge batteries; it's slightly smaller than Tesla's Powerwall, which holds 13.5 kWh.
The sonnenCore marks an evolution in sonnen's strategy. As other providers raced to match Tesla's low price, sonnen went up-market with the ecoLinx, launched in 2018 to appeal to the luxury-home-automation crowd. At more than double the price of similarly sized home battery offerings, the ecoLinx promised a 15-year warranty and the ability to control smart-home devices, allowing it to manage both demand and supply of energy.
The new product, which begins shipping this year but will reach full availability in 2021, comes at a time when the U.S. residential storage market is bigger than ever. A record season for wildfires and hurricanes, on top of coronavirus-related stay-at-home orders, has driven resilience to the top of customer's minds. U.S. residential storage installations have set consecutive records for each of the last five quarters, according to data from Wood Mackenzie.
"A lot more people will have access to sonnen now that we have this product that’s priced at a much lower, much more accessible rate," said Adam Gentner, VP of premium products and projects, in an interview this week.
Learning from the luxury market
Sonnen's U.S. CEO Blake Richetta said when launching the ecoLinx that selling a high-value product to the luxury market initially would eventually let the company bring those innovations to the masses.
Now the company has taken the lessons from ecoLinx and put them into the design of the sonnenCore, Gentner said.
Sonnen designed its own batteries, inverters and battery management system for the Core. That approach sacrifices some cost savings that come from sourcing off-the-shelf components. But sonnen's global purchasing scale (the company has a more pronounced presence in Europe, where it originated) drives its own cost efficiencies, and controlling the design allows more control over the use.
"That gives us a better ability to design this product to meet the needs of the future and adapt the current product," Gentner explained.
The rules that allow home batteries to participate in grid services are evolving in real time due to state policy and the Federal Energy Regulatory Commission's Rule 2222. If new ways emerge to make money with batteries, sonnen can push out software updates to take advantage of them.
Sonnen once again chose lithium-iron-phosphate batteries, selected for their safety features and cycle life compared to the nickel-manganese-cobalt-oxide chemistries popularized in the electric vehicle space.
"We intend for the battery to be installed indoors; we intend this battery to be used for grid services," Gentner said. "It’s designed to be cycled every day to the benefit of the grid."
The Core system comes warrantied for 10 years or 10,000 charge cycles. The ecoLinx, with its heftier warranty and more durable design, is still sonnen's preferred offering for heavy-duty grid operations in a virtual power plant setting. The Core is geared for customer-oriented programs, like solar self-consumption, time-of-use rates, and demand response programs.*
Evolving revenue opportunities
In Germany, the grid goes down so infrequently that sonnen doesn't bother selling batteries for backup power. Instead, the liberalized market rules in that country allow batteries in homes and apartments to bid into the power markets. With its sonnenFlat program, sonnen supplies power for customers in exchange for using their batteries to play the markets.
That model does not work in the fragmented regulatory environment of the United States. Then again, the U.S. grid doesn't work as well as Germany's does either. Much of the interest in home batteries has been driven by U.S. customers eager to keep the lights on when the power grid fails.
But sonnen has worked to adapt the aggregated battery model from Germany. It orchestrated a virtual power plant with batteries in each unit of an apartment complex outside of Salt Lake City; that one serves a demand-response contract to utility Rocky Mountain Power. Sonnen also worked with homebuilder Wasatch Group to bring a similar concept to California. At the same time, New England states have adopted a "bring your own device" paradigm whereby utilities pay customers for using their batteries to reduce demand at key times.
It can be hard to pitch backup batteries as a purchase that will pay itself off for homeowners; residential customers typically buy them for peace of mind rather than economics. But the emerging revenue streams improve the customer calculus for buying a battery, effectively lowering the cost of clean backup power.
"There’s obviously a huge value that customers place on backup," Gentner said. "With the ability to begin to extract value from the battery, we’re going to get closer to that [return on investment]."
That said, a single 10 KWh battery would be "pretty lean" for backing up an entire home, Gentner noted. Sonnen's earlier eco product is more geared for that, with an 8 kW inverter and storage up to 20 kWh. But the sonnenCore can back up essential loads and participate daily in revenue-generating grid programs, all for a much lower price than sonnen previously offered.
*Updated with more information on the grid services applications for Core and ecoLinx.