Implementing Home Energy Storage in the EU – But How?
February 17, 2016
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Stating that home energy storage becomes important is almost a no-brainer. The challenge is how market parties and governments will implement storage alongside renewable energy sources and smart grids in Europe. Widely different opinions notwithstanding, customer acceptance, regulations and societal questions will play crucial roles.
Due to the rapid, continuing growth of rooftop solar PV and large-scale onshore wind turbines and offshore wind farms the last decade, the need for a more flexible energy system becomes increasingly significant. Moreover, danger is looming on the horizon: within a decade, the cheapest and mayor source of all storage - pumped hydro from Scandinavia or from the Alps – cannot make up for imbalances in the European grid any more, as dr. Fokko Mulder, professor of Materials for Integrated Energy Systems at Technical University Delft points out. Most, if not all parties – ranging from TSO’s (transmission system operators) and utilities to electric car manufacturers and start-ups – are therefore looking for opportunities to fill the gap.
Storage can take up many forms. The one that attracts the most attention, is distributed energy storage systems (or DESS). Proponents hail DESS – home storage hereafter - as the ‘Holy Grail’ in the worldwide energy transition towards a sustainable society. As discussed in my previous article in this series, home storage is gaining momentum in Australia already.
According to the latest report of the well-known research center Fraunhofer Institut, Germany accounted for about 21% of all PV capacity installed worldwide. PV is covering almost 7% of Germany's electricity demand in 2014. From 2013 until December 2015 the Federal Ministry for Economic Affairs and Energy offered a 30% investment grant on solar storage purchased with low-interest loans. So far, 13.000 residential battery systems have been installed in Germany. Panasonic and Tesla – who work closely together in the Megafactory, the giant battery manufacturing facility in the US - have started to combat each other in the German storage market.
It is often said that rooftop solar and home storage form a ‘match made in heaven’. Not only can home storage smooth out peaks and troughs of intermittent electricity supplies, it also has far-reaching implications for the design and operation of electricity distribution grids in the future. Storage, in other words, will influence more than just the ‘behind the meter’ market.
Jillis Raadschelders, head of the department Renewables & Storage of consultancy DNV GL, clarifies this added value from a grid-scale point of view. “More flexibility by way of energy storage isn’t limited to ‘behind the meter’. It also contributes to grid stabilisation. The challenge is how other flexible options like peak shaving, enhanced frequency control, congestion management and quality of voltage will be valued in the near future. Moreover, standardisation is a prerequisite for a mature storage market in which safety and other issues are guaranteed.”
Haike van de Vegte, senior consultant new energy technologies at the same consultancy, points towards a looming field of tension in home energy storage: at which level should we maximise energy storage? Will it be at residential level, the neighbourhood/village or at the distribution district? “Maximising at the residential level might lead to sub-optimisation at another level”, he says. He illustrates this as follows: “take a well-to do neighbourhood in which there are electric cars, heat pumps and rooftop PV. Their cumulative capacity exceeds a water kettle many times over and, combined, might last for 24 hours. In turn, that leads to grid overload. Who, then, will pay for extra transformers or other reinforcements to the public electricity distribution system? By law, system operators are obliged to secure electricity balance at all times, no matter what happens behind the meter or its connections, but in this case the neighbourhood has caused electricity overload, costs that have to be paid by society at large. Though there are sensible solutions such as controlled dynamic pricing or converter management, it is first and foremost a social question which politicians have to answer.”
And there is more that hasn’t been defined yet. From a regulatory standpoint, deployment of energy storage – be it thermal, grid-scale or home storage – does not happen on a level playing field. For almost a hundred years, generation, transmission and consumption were the only elements in the energy system. The fourth and latest element is not yet taken into consideration in EU electricity directives: energy storage. By nature, storage can switch, sometimes within a second, from charging energy to delivering or discharging, so it does not fit in the traditional electricity assets system. This has dire consequences.
Patrick Clerens, Secretary-General of the Brussels-based EASE, the European Association for Storage of Energy, sketches the outlines. “How can we come up with technological demonstrations without R&D money and a proper market design? The fourth element of the electricity system needs to have its own asset class and legal framework. That’s what’s lacking. For example, in some European Member States, storage owners pay fees or taxes on electricity intake and on release. Double charging is not helping the roll-out of storage. Another example is the network code. Those codes have been designed with large energy plants in mind and often do not allow small players like energy storage to perform services to the grid, even though the technology would be able to perform those services. This is also blocking the way forward for storage”, he says.
Institutions and member-states might consider taking gas storage as a lead. The Gas Directive (2009/73/EC) includes clear roles for gas storage. For storage, suppliers have to pay a fee, for release they get this fee in return. Though the right parameters need to be analysed, this can be a way forward for energy storage.
Flexibility is the magic word. Flexibility of the grid measured in seconds. Flexible tariffs that reflect the right price of intermittency in the market ‘behind the meter’ (a market that does not exist right now). When home storage owners will grasp the opportunity to profit from devices at junctions in the system, new aggregators may emerge. Those aggregators then trade the cumulative small-scale capacity of all renewable resources ‘behind the meter’ on the future balancing market. Clerens explains: “Grid storage devices have been used for balancing at the East Coast of the US. The electricity system fed by energy storage reacted faster, more adequate and balancing costs were overall cheaper by using these devices. The big question remains: how can we build an energy storage reserve into the system?”, he asks.
Monique Blokpoel has a clue to an answer. She is a long-time energy innovator in the Netherlands, previously working at the Rotterdam-based utility Eneco and now advisor for the Dutch agency Innovatie Link (among others). According to her, big utilities are becoming obsolete. “Small and medium enterprises (SME’s) are the future when it comes to innovation. Established parties can’t take up this role because of a lack of creativity and flexibility. They want to, they are buying start-ups but they won’t make it.”
According to her, SME’s have two main obstacles that have to be overcome to come on a par with big utilities: attracting launching customers and the right financing. Local government could provide a solution. “Municipalities or provinces don’t have the capacity to place product/service combinations into the market while SME’s lack access. Municipalities or provinces could act as launching customers by using their real estate for solar and storage and withdraw as soon as there is a workable business case. At the moment, SME’s also cannot find the right financing. Large pension funds, private partners or venture capitalists might fill in this gap. To lay a foundation for energy storage, we could start with advanced pilots, just like utility Eneco did some years ago with a charging infrastructure for electric vehicles (EV). Those experiments became the basis of our EV charging network and the recent announcement of TSO TenneT to join forces with The New Motion to make the electricity grid more robust”, she says.
Blokpoel is convinced the customer is king. “We see the last convulsions of big utilities that do have the intention to listen to customers but in reality they don’t. When our electricity grid comes under pressure, there are two options: either to reinforce the public distribution system or to adapt to innovative technologies in which solar storage is the key”, she demarcates the fences for the energy landscape in the near future. “People have the power. They hold the key to the solution, better, faster, cheaper. Better connections, faster response and services, cheaper electricity. It will be like the telecommunications revolution with smart phones in 2008.”
According to Blokpoel, the emergence of disrupting technologies in the energy sector is at hand, just like AirBNB and Uber have done in other markets. Service instead of ownership, to be more precisely 'service as you come and go', easy to install applications (like an iPhone app) and a limited number of possibilities to reduce customers’ choice anxiety are characteristics. She says: “Extending its packaging and marketing will not help utilities and system operators. Response time and comfort as services to customers is of utmost importance. I believe a radical change is necessary to really get a foothold in the future storage field.”
Image: Popup Solar Station outside the National Museum of Singapore. By: ProjectManhattan. CC-BY licence
Due to the rapid, continuing growth of rooftop solar PV and large-scale onshore wind turbines and offshore wind farms the last decade, the need for a more flexible energy system becomes increasingly significant. Moreover, danger is looming on the horizon: within a decade, the cheapest and mayor source of all storage - pumped hydro from Scandinavia or from the Alps – cannot make up for imbalances in the European grid any more, as dr. Fokko Mulder, professor of Materials for Integrated Energy Systems at Technical University Delft points out. Most, if not all parties – ranging from TSO’s (transmission system operators) and utilities to electric car manufacturers and start-ups – are therefore looking for opportunities to fill the gap.
Storage can take up many forms. The one that attracts the most attention, is distributed energy storage systems (or DESS). Proponents hail DESS – home storage hereafter - as the ‘Holy Grail’ in the worldwide energy transition towards a sustainable society. As discussed in my previous article in this series, home storage is gaining momentum in Australia already.
Germany leads
According to the latest report of the well-known research center Fraunhofer Institut, Germany accounted for about 21% of all PV capacity installed worldwide. PV is covering almost 7% of Germany's electricity demand in 2014. From 2013 until December 2015 the Federal Ministry for Economic Affairs and Energy offered a 30% investment grant on solar storage purchased with low-interest loans. So far, 13.000 residential battery systems have been installed in Germany. Panasonic and Tesla – who work closely together in the Megafactory, the giant battery manufacturing facility in the US - have started to combat each other in the German storage market.
It is often said that rooftop solar and home storage form a ‘match made in heaven’. Not only can home storage smooth out peaks and troughs of intermittent electricity supplies, it also has far-reaching implications for the design and operation of electricity distribution grids in the future. Storage, in other words, will influence more than just the ‘behind the meter’ market.
Jillis Raadschelders, head of the department Renewables & Storage of consultancy DNV GL, clarifies this added value from a grid-scale point of view. “More flexibility by way of energy storage isn’t limited to ‘behind the meter’. It also contributes to grid stabilisation. The challenge is how other flexible options like peak shaving, enhanced frequency control, congestion management and quality of voltage will be valued in the near future. Moreover, standardisation is a prerequisite for a mature storage market in which safety and other issues are guaranteed.”
Maximise: But at which level?
Haike van de Vegte, senior consultant new energy technologies at the same consultancy, points towards a looming field of tension in home energy storage: at which level should we maximise energy storage? Will it be at residential level, the neighbourhood/village or at the distribution district? “Maximising at the residential level might lead to sub-optimisation at another level”, he says. He illustrates this as follows: “take a well-to do neighbourhood in which there are electric cars, heat pumps and rooftop PV. Their cumulative capacity exceeds a water kettle many times over and, combined, might last for 24 hours. In turn, that leads to grid overload. Who, then, will pay for extra transformers or other reinforcements to the public electricity distribution system? By law, system operators are obliged to secure electricity balance at all times, no matter what happens behind the meter or its connections, but in this case the neighbourhood has caused electricity overload, costs that have to be paid by society at large. Though there are sensible solutions such as controlled dynamic pricing or converter management, it is first and foremost a social question which politicians have to answer.”
Fourth asset class
And there is more that hasn’t been defined yet. From a regulatory standpoint, deployment of energy storage – be it thermal, grid-scale or home storage – does not happen on a level playing field. For almost a hundred years, generation, transmission and consumption were the only elements in the energy system. The fourth and latest element is not yet taken into consideration in EU electricity directives: energy storage. By nature, storage can switch, sometimes within a second, from charging energy to delivering or discharging, so it does not fit in the traditional electricity assets system. This has dire consequences.
Patrick Clerens, Secretary-General of the Brussels-based EASE, the European Association for Storage of Energy, sketches the outlines. “How can we come up with technological demonstrations without R&D money and a proper market design? The fourth element of the electricity system needs to have its own asset class and legal framework. That’s what’s lacking. For example, in some European Member States, storage owners pay fees or taxes on electricity intake and on release. Double charging is not helping the roll-out of storage. Another example is the network code. Those codes have been designed with large energy plants in mind and often do not allow small players like energy storage to perform services to the grid, even though the technology would be able to perform those services. This is also blocking the way forward for storage”, he says.
Institutions and member-states might consider taking gas storage as a lead. The Gas Directive (2009/73/EC) includes clear roles for gas storage. For storage, suppliers have to pay a fee, for release they get this fee in return. Though the right parameters need to be analysed, this can be a way forward for energy storage.
New aggregators
Flexibility is the magic word. Flexibility of the grid measured in seconds. Flexible tariffs that reflect the right price of intermittency in the market ‘behind the meter’ (a market that does not exist right now). When home storage owners will grasp the opportunity to profit from devices at junctions in the system, new aggregators may emerge. Those aggregators then trade the cumulative small-scale capacity of all renewable resources ‘behind the meter’ on the future balancing market. Clerens explains: “Grid storage devices have been used for balancing at the East Coast of the US. The electricity system fed by energy storage reacted faster, more adequate and balancing costs were overall cheaper by using these devices. The big question remains: how can we build an energy storage reserve into the system?”, he asks.
SME’s: drivers of innovation
Monique Blokpoel has a clue to an answer. She is a long-time energy innovator in the Netherlands, previously working at the Rotterdam-based utility Eneco and now advisor for the Dutch agency Innovatie Link (among others). According to her, big utilities are becoming obsolete. “Small and medium enterprises (SME’s) are the future when it comes to innovation. Established parties can’t take up this role because of a lack of creativity and flexibility. They want to, they are buying start-ups but they won’t make it.”
According to her, SME’s have two main obstacles that have to be overcome to come on a par with big utilities: attracting launching customers and the right financing. Local government could provide a solution. “Municipalities or provinces don’t have the capacity to place product/service combinations into the market while SME’s lack access. Municipalities or provinces could act as launching customers by using their real estate for solar and storage and withdraw as soon as there is a workable business case. At the moment, SME’s also cannot find the right financing. Large pension funds, private partners or venture capitalists might fill in this gap. To lay a foundation for energy storage, we could start with advanced pilots, just like utility Eneco did some years ago with a charging infrastructure for electric vehicles (EV). Those experiments became the basis of our EV charging network and the recent announcement of TSO TenneT to join forces with The New Motion to make the electricity grid more robust”, she says.
Customer is king
Blokpoel is convinced the customer is king. “We see the last convulsions of big utilities that do have the intention to listen to customers but in reality they don’t. When our electricity grid comes under pressure, there are two options: either to reinforce the public distribution system or to adapt to innovative technologies in which solar storage is the key”, she demarcates the fences for the energy landscape in the near future. “People have the power. They hold the key to the solution, better, faster, cheaper. Better connections, faster response and services, cheaper electricity. It will be like the telecommunications revolution with smart phones in 2008.”
Emerging disruptive technologies
According to Blokpoel, the emergence of disrupting technologies in the energy sector is at hand, just like AirBNB and Uber have done in other markets. Service instead of ownership, to be more precisely 'service as you come and go', easy to install applications (like an iPhone app) and a limited number of possibilities to reduce customers’ choice anxiety are characteristics. She says: “Extending its packaging and marketing will not help utilities and system operators. Response time and comfort as services to customers is of utmost importance. I believe a radical change is necessary to really get a foothold in the future storage field.”
Image: Popup Solar Station outside the National Museum of Singapore. By: ProjectManhattan. CC-BY licence
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