Home Battery Storage-Getting the Economics Right

The home battery storage market is still very much in its infancy but the opportunities are large and competition is growing.
Published: Mon 11 Apr 2016

With residential consumers wanting to take more control of their energy generation and consumption, the market is set to soar to new heights. In fact, impressive figures predicted by Navigant Research reflect this- annual revenues are expected to climb from $450 million last year to more than $16.5 billion in 2024.

The research firm describes home battery storage as "one of the fastest-growing markets for energy storage" and it expects distributed energy storage systems to undergo rapid growth.

Energy storage market growth

Over the last year, we have seen a number of new market entrants bringing highly impressive and innovative solutions to this space. [Home Energy Storage is Here.]  [All Aboard The (Residential) Energy Storage Train!]

These include the likes of JuiceBox Energy in the US with its 8.6kWh lithium-ion battery system that is suitable for solar energy installations; Kyocera in Germany with its 4.8kWh and 7.2kWh lithium-ion batteries; microinverter company Enphase Energy with its modular, plug-and-play system that would be fully integrated with the just-introduced Enphase Energy Management System; ABB’s energy storage system that enables homeowners and landlords to store any excess energy generated by their PV installation.

Even automobile firms are entering the market. The latest entrant is German car manufacturer, Daimler which has is developing Benz-branded battery backup power systems for the residential and business sector. [Automobile Firms Rush to Grab Their piece of the Energy Storage Market.]

But the biggest showstopper of all was Tesla Motor’s entry into the home energy market, announcing that its “Gigafactory” in Nevada would churn out the most cost effective battery solution for the residential energy storage market. [Engerati-Tesla’s Gigafactory to Lower Battery Energy Storage Costs]. It was predicted that the gigafactory would decrease battery costs by more than 30%. Tesla broke ground on the Gigafactory in June 2014 and it is expected to begin cell production in 2017. By 2020, the Gigafactory will reach full capacity and produce more lithium ion batteries annually than were produced worldwide in 2013.

Consider the economics of battery manufacturing

In the interim, Tesla produced a 10kW Powerwall residential battery which was marketed as a backup power supply. Tesla was angling to sell the battery for $3,500 to consumers who want peace of mind in the event the grid goes down, especially as a result of superstorms. But due to its short lifespan (only 500 cycles), it has been discontinued by Tesla.

When compared with other deep cycling lead acid batteries on the market that offer 1,000 cycles, the 10kW Powerwall didn’t measure up. In California, batteries can benefit from the state's Self-Generation Incentive Program (SGIP). But California regulators have indicated that battery systems need to be able to cycle five times a week in order to be eligible, which would exclude Tesla's bigger battery.

In addition, these deep cycling lead acid batteries were costing less than half of the 10kW Powerwall’s price. Experts say that the problem is that the economics for a lithium-ion backup battery aren’t attractive and that for pure backup applications only providing 500 cycles, lead acid batteries or gensets are more economical.

State-of-the-art backup generators from companies like Generac and Cummins sell for $5,000 or less. These companies also offer financing.

In addition to the hefty price tag, other residential storage solutions offer multiple services-not just a back up service.

Tesla’s $3,000 6.4-kWh system, which offers 5,000 cycles (with a 100% depth of discharge) has been designed for daily cycling applications, such as load shifting and is still in demand.

There are a number of companies offering competing products to Tesla's Powerwall. ElectrIQ is probably the newest on the scene. The company is offering its IQ System home battery and software, which offers customers access to battery data, appliance usage stats and an overview of connected solar resources.​ The new company has already said it has 4,000 pre-orders for the systems, which include integrated software and a DC-to-AC inverter for about a $16,000 retail pricetag.

It’s a matter of time before the market explodes into a plethora of energy storage technologies at great prices. Tesla had better hope that it’s Gigafactory delivers on price as well as quality.