Domestic energy storage – does it stack up?

Posted in: Energy

Posted on: 24.07.2017

Renewable energy is clean, popular, already cost competitive with old fashioned fossil and nuclear technologies – and getting cheaper all the time. But every form of energy our civilisation has harnessed has its Achilles heel; for renewables, it’s intermittency. Wind turbines and solar PV panels don’t always produce power when you need it - and sometimes produce power when you don’t need it.

Thankfully, there are ways to tackle this problem. One such solution is to store electricity generated at periods of low demand in order to use it later when demand is high. Pumped hydro schemes have performed this role in the UK for decades:  water is pumped uphill into a reservoir at off-peak periods and, later on, allowed to flow downhill, turning a turbine, to meet on-peak electricity demand.  

But pumped storage is hampered by huge construction costs, a limited number of suitable sites, major environmental concerns, and inefficiency (about 25% of the energy is lost on its round trip up the hill and down again). However, there are a number of other energy storage technologies, with batteries - particularly lithium ion batteries of the kind that power smartphones and laptops - emerging as arguably the most widely applicable. At Good Energy we’ve been looking at battery storage for a few years.

We think about battery storage at three scales:

 

Firstly, “grid scale battery storage”

This means attaching relatively large batteries (with a capacity of 1MW upwards, for example) to the electricity network. This can, for instance, address the unsatisfactory current situation where, on very windy days, turbines have to be “curtailed” – i.e. deliberately ‘spill’ some or all of the wind to ensure supply doesn’t exceed demand (the grid needs to be balanced at all times). Rather than letting this lovely renewable energy go to waste, a battery can soak it up and then discharge at peak times, reducing the need for fossil fuel generators to kick in. In 2015, around 1.3TWh of wind generation was constrained, which otherwise would have displaced thermal generation which emitted around 500,000 tonnes of carbon dioxide.

Secondly, there is commercial scale storage

Larger businesses pay for local network charges which vary depending on when power is used.

The highest of these charges can be a thousand times more expensive than the lowest rates. So, depending on their patterns of energy use, for some businesses it will make sense to install a battery and charge it up at off-peak periods to ensure they can avoid these very high network charges while maintaining a secure power supply.

Finally, there are domestic batteries

A box about the size of a standard boiler or a small fridge installed in your garage or under the stairs. We’re sometimes asked by our customers whether they should be buying batteries for their homes. The simple answer is: soon, but not yet.

Batteries come closest to making sense in households with home generation technology (most commonly PV panels on the roof). These homes get paid under the government’s Feed-In Tariff scheme for the electricity they generate, regardless of whether they use it or spill it to the grid. Unsurprisingly, these households want more of their energy demand to be met from the free power they generate, rather than the more costly power they buy from the grid.

But PV panels generate most during the middle of the day when many of us are out of the house at work.  A battery could store this power for us, to be used when we get home in the evening. And batteries have the bonus feature of providing backup power in the event of a power cut.

At Good Energy we’re the kind of people that get excited by new technology - particularly technology that is vital to the increasing deployment of renewable power generation.  A lot of us are itching to install a beautiful, shiny battery in our own homes – indeed, some of us have.

But we think that domestic batteries are still in the ‘early adopter’ phase, appealing to those that are motivated by the love of new technology, or perhaps a desire to live “off-grid”. These people will be a minority; most people will make the decision to install a battery based on the economics - and today we don’t think they really stack up.

Current issues with domestic battery storage

  • Domestic batteries are still expensive, particularly when you include the installation costs and all the related controlling equipment needed.
  • Batteries degrade every time you charge and discharge them.
  • The systems on the market tend to come with a ten year guarantee, which gives you a sense of their manufacturers’ view of their life-expectancy – and the timescale you would have to break even on your investment. Based on today’s economics, most households never would.

So what needs to change before the economics of home batteries stack up for everyone?

Firstly, the kit needs to be cheaper. Costs are falling all the time and the speed of the cost reduction has outstripped most predictions that were made.

Secondly, the domestic market needs to mature. There are some good and some bad systems out there and, similarly, good and bad installers. The weak points in the systems we’ve seen tend not to be the batteries themselves, but the control systems that sit between the battery, any home generation equipment such as PV panels, and your energy-using appliances.

Thirdly, government policy needs to change to better recognise and reward the benefits that domestic batteries offer beyond the houses they’re installed in – i.e. to the grid, the environment, and other energy users. For example, by reducing peak demand, domestic storage could remove the need to invest in new power stations, saving everyone money. Domestic storage will also increase the value of the Merit Order Effect of renewable generation, reducing energy prices for us all.  And because the carbon intensity of the grid is highest at peak times, by reducing peak demand, domestic storage will help cut the UK’s greenhouse gas emissions. Encouragingly, there are signs that the authorities are starting to recognise these benefits and have begun to put in place the right policies.

Fourthly, more sophisticated domestic tariffs must be enabled, with prices that vary depending on when energy is used, better reflecting the variable costs involved.  At the moment, the main “time-of-use” tariffs available to domestic customers are simple two-rate tariffs, like Economy 7. But the rollout of smart meters will – eventually - open up the possibility of more sophisticated, multi-rate tariffs which encourage energy-users to shift their energy demand to off-peak times - something that batteries can help do. This vision depends on the successful rollout of smart meters – a challenging project for the whole industry, but one which will lay the foundations for an energy system fit for the twenty-first century.

So, we feel that domestic batteries have fantastic potential, but there are some critical pieces of the jigsaw to fall into place first. When the time is right, we will guide our customers to making the right choices on battery storage for them.

Posted in: Energy

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