What will Germany's $67 million PV-plus-storage incentive buy?
By Brian Warshay
Perhaps in response to the power outage seen 'round the world by over 108 million Super Bowl viewers, the German Federal Ministry of the Environment set aside $67 million over the next three years for its $1,080/kWh subsidy for photovoltaic (PV)-tied energy storage (ESS) for PV systems with under 30 kW of generation capacity.
This incentive will make nearly any emerging energy storage technology capable of tying into a PV array cost-effective, given that today most energy storage technologies are at or below $1,080/kWh already. This incentive is different from the $2/W subsidy for on-site storage from California's Self-Generation Incentive Program (SGIP) that values the power capability of storage rather than its energy capacity.
Subsidizing the energy capacity of a storage system rather than its power capacity, as the Self Generation Incentive Program (SGIP) does in California, for solar storage is a more logical approach because the solar shifting application requires more energy than power. Such an incentive will benefit technologies capable of longer discharge duration, such as molten salt and flow batteries, rather than most lithium-ion batteries.
This opportunity will benefit both new installations and retrofits for existing small-scale rooftop PV capacity, which accounts for approximately 35% of the 30 GW (22,300 GWh) of installed PV capacity in Germany at the end of 2012. Retrofit costs may be slightly higher due to the need for an additional bidirectional inverter whereby a newly designed solar plus storage system can potentially make use of one shared inverter. Although the 62 MWh that will be supported by this new incentive represents barely a fraction of the addressable PV storage capacity, compared to the 2.21 MWh of non-pumped hydro (PH), non-compressed air energy storage (CAES) for any application currently installed in Germany, it is an opportunity for Germany alone to more than double the total non-PH, non-CAES grid storage capacity in the entirety of Europe.
It is important to note that this cursory analysis ignores the benefits to the utility for increased self-consumption. For Germany to properly encourage on-site generation and consumption through the use of ESS, it needs to favor self-consumption more than just self-generated and sold electricity, which will take into account the electricity lost due to the efficiency of an ESS. Such a policy will inherently encourage storage technologies with higher efficiencies and depth-of-discharges. A FiT only encourages self-generation and ignores the grid impact.
Regardless, this generous incentive will result in a short-lived but rapid boom in distributed ESS throughout the German countryside. Undoubtedly, the host of PV plus storage partnerships will flourish under this legislation, much like those that benefitted from the SGIP in California in 2012. Developers with any hopes of addressing this market opportunity will need to move quickly into Germany to establish partnerships that will help decipher the bureaucratic requirements necessary to benefit from this new policy. Lux Research will be examining the impact of this policy and others in their second quarter State of the Market Report that will evaluate the potential for solar plus storage systems.
Brian Warshay is a Research Associate for the Grid Storage Intelligence service at Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. For more information, visit the Lux Research site.
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