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Assessment of residential battery systems (RBS): profitability, perceived value proposition, and potential business models

Markus Graebig, TU Berlin

Georg Erdmann, TU Berlin

Stefan Röder, Steinbeis-Hochschule Berlin

37th IAEE International Conference, New York City, 2014

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Functional principle of RBS

Source: Graebig et al, E3/DC GmbH

Residential battery systems (RBS) for enhanced self-sufficiency

Home automation

Electricity consumer

(load)

Grid

E-mobility RBS

Conclusion Results Methods Introduction

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Guaranteed feed-in tariff for PV and average electricity price for households*

* Guaranteed feed-in tariff for PV, 10 kWp roof-top photovoltaics, new installation, average electricity tariff for a typical German household, 3 people, 3,500 kWh/year ** IHS Technology, Press Release: PV Storage Market Set to Explode to $19 Billion in 2017; Germany Leads Again, 2013 Source: IWR, BMU, BNetzA, BDEW

“Grid parity“ in Germany paves the way for RBS

0

10

20

30

40

50

60

2004 2006 2008 2010 2012 2014

Average electricity price

PV feed-in tariff

€-C

t/kW

h

• PV storage market expected to grow from $ 0.2 bn (2012) to $ 19 bn (2017)**

• Up to 70% market share in Germany**

• 30% government subsidy for RBS in Germany

Conclusion Results Methods Introduction

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Recent statements of top-managers from German major utilities

Source: ZfK (January 2013); BDEW-Kongress 2013; Handelsblatt (2014-01-28); celron consulting (2014-01-15)

German utilities are in need of new business models

Conclusion Results Methods Introduction

“Currently, all traditional utilities have their back to the wall.“

Kurt Mühlhäuser (former CEO of Stadtwerke München)

“The utilities‘ business model is dead.“

Werner Brinker (CEO of EWE)

“We are facing the worst structural crisis in the history of

electrical power supply.“

Peter Terium (CEO of RWE AG)

German utility managers expect a decline in electricity sales of EUR 8.3 bn. (11%) by 2020, in some smaller rural utilites even up to 19%, due to “prosumers“.

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Methods (1/2): RBS model

Source: Graebig et al

Model-based estimation of RBS’s expected profitability and degree of self-supply under optimistic assumptions

Input parameters (Optimistic) reference scenario

• Standard load profile SLP (15 minutes / 365 days) and total annual demand

• PV generation profile (15 minutes / 365 days) and total generation

• Feed-in tariff (0.136 €/kWh)

• Electricity price (only variable cost for energy: 0.27 €/kWh) and historic growth rate of 4.7% p.a.

• Technical parameters (degradation of PV and RBS, RBS efficiency, etc.)

• PV capacity: 7 kWp

• RBS capacity: 4 kWheff

• RBS peak power: 2 kWp

• RBS lifespan: 20 years

• Cost of capital: 3.1% p.a.

Output parameters

• Degree of self-supply

• Net present value (NPV) of RBS operation

Conclusion Results Methods Introduction

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Methods (2/2): online customer survey

Source: Graebig et al

Customer survey on purchasing criteria and willingness to pay

Conclusion Results Methods Introduction

17.7%

Private customers 360

Valid responses 377

Survey finished 396

Survey started 841

Invitation via e-mail 2,134

• Partner: “typical“ municipal utility in southern Germany

• Small city with 30,000 residents, less than 3% unemployment

• Online survey in June 2013: (1) Feedback for the utility (2) Utilities in general (3) Perception of RBS

• Objective of the RBS survey: (a) purchasing criteria and willingness to pay (b) Structural equation modelling for perceived value proposition

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RBS pay-back (NPV over 20 years) under optimistic assumptions*

* Assumptions: 4 kWheff RBS capacity; 2 kWp RBS peak power; 20 years RBS lifespan; 3.1% p.a. cost of capital Source: Graebig et al

Benefit of RBS below 1,000 €/kWheff

Conclusion Results Methods Introduction

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Market overview of RBS in Germany, 2013*

* “Pb” denotes lead-based batteries, “Li” lithium-ion-based batteries Source: providers’ websites, researched by André Huschke; Focus magazine, 2013

Cost of Li-based RBS around 3,000 €/kWheff

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

10,000

5,000

0

40,000

35,000

30,000

25,000

20,000

15,000

Li

Pb

EUR

kWh (effective capacity)

Conclusion Results Methods Introduction

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Degree of self-supply, based on PV, with and without RBS*

* Assumptions: 7 kWp PV capacity; 4 kWheff RBS capacity; 2 kWp RBS peak power; 20 years RBS lifespan; 3.1% p.a. cost of capital Source: Graebig et al

Degree of self-supply is substantially enhanced by RBS

0

10

20

30

40

50

60

70

80

90

100

43.7%

3,000

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

64.2%

42.0%

4,000

€ 3,914

70.3%

10,000 9,000 8,000

€ 3,730

50.9%

37.8%

7,000

€ 3,821

54.4%

39.1%

6,000

€ 3,914

58.7%

40.4%

5,000

€ 3,989

Electricity demand [kWh per year]

RB

S e

con

om

ic b

en

efit

[€

, NP

V]

De

gre

e o

f se

lf-s

up

ply

[%

]

PV + RBS

only PV

RBS benefit

Conclusion Results Methods Introduction

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Customers‘ attitude towards RBS

Source: Graebig et al

Customers attribute “soft factors“ to RBS

100%

3.1 %

7.2%

54.2%

86.1%

78.0%

13.6%

100% Disagree Agree

I like the idea of an RBS.

I can envision using an RBS.

I am planning on purchasing an RBS.

N = 360

80.1%

70.0%

69.4%

65.9%

60.5%

Saving money through higher PV self-supply

Avoiding future electricity price rises

Independent electricity supply for my home

Protecting environment, mitigating climate change

Contributing to the “Energiewende”

100% 0% Agree

Top-5 reasons for an RBS

Conclusion Results Methods Introduction

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Willingness to pay exceeds the expected pay-back

What would you consider a fair price (one-time purchasing price or monthly leasing fee, respectively)?

n/a

24.7%

Leasing

25.6%

Purchasing 49.7%

What would be your preferred mode of payment for an RBS?

n = 352

[EUR]

[EUR]

Conclusion Results Methods Introduction

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Conclusion and outlook: 5 hypotheses about RBS

* Note: RBS is targeted to microeconomic decision-makers – no system perspective. Source: Graebig et al

RBS may trigger some very innovative business models

Conclusion Results Methods Introduction

(1) Two-fold value proposition: self-sufficiency vs. cost-efficiency.

(2) Pay-back of RBS is only 20-30% of purchasing price ... ... but customers value the “soft factors“, particularly self-sufficiency.

(3) RBS may generate additional value (e.g., micro-CHP, “battery cloud“, etc.).

(4) RBS provide new business opportunities for utilities (leasing, customer retention, cross-selling, etc.).

(5) International markets beyond Germany might be more attractive: security of supply as an additional value proposition.

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B A C K U P

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Comparison of standard load profile (SLP) with a high-res synthetic load profile*

* One Thursday in February. SLP (15 min) vs. synthetic load profile (1 min), 4,577 kWh total annual electricity demand. Source: refined PV/RBS model by Graebig, Birkholz, Eicke, Huschke (unpublished paper)

Standard load profile (SLP) smoothens demand peaks and leads to an overly optimistic assessment of RBS

Conclusion Results Methods Introduction

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Self-sufficiency through RBS under optimistic assumptions

Source: Graebig et al

More than 70% self-supply achievable

Outlook Results Methods Introduction

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Preliminary results from the structural equation model

Source: Graebig et al

Self-sufficiency is major driver for a positive attitude towards RBS

Outlook Results Methods Introduction

Perceived usefulness

Subjective norm

Perceived ease of use

Being self-sufficient

Attitude towards use

Intention to use

Personal innovativeness

0.14 / 2.93

0.1

3 /

3.0

7

0.26 / 6.04

0.55 / 10.37

0.31 / 5.56

0.67 / 11.35