Will big utilities capture the energy storage market?

Published: Wed 29 Jun 2016
A blog entry by Julian Jansen

Contributed by:

Julian Jansen
Senior Analyst - Energy Storage
IHS MARKIT

Julian Jansen's Blog

With one or two notable exceptions, energy companies have proven to excel at selling energy to customers, however they have struggled to adopt new technological oppportunities. The solar PV boom in Europe over the last decade or so has been missed by most utilities, with the market being mainly captured by installers, distributors and manufacturers. So can energy suppliers do for energy storage what they missed out on with solar PV?

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Energy storage a ‘no brainer’ for energy suppliers?

The energy companies committed to a strategy around energy storage have had some limited success with a combined total of around 2,000 installations in the last 12 months. This represents less than 10% of the overall European market and it could be that many energy suppliers are in the process of missing the boat once again by moving too slowly. The reasons for energy suppliers to prioritise energy storage as part of their customer offerings include:

  • Energy suppliers can lock customers in energy contracts via long term energy storage offerings – especially where this includes maintenance or additional value propositions.
  • The energy supplier can benefit from an improved customer relationship and customer engagement may reduce operational costs for the supplier.
  • Offering energy storage can be an upsell and cross-sell opportunity from other products (e.g. PV or Smart Home products).
  • Their expertise in wholesale and balancing markets enables them to capture value from energy storage across the energy system, in a way that other players will find hard to replicate.

Storage offerings are sprouting up across Europe

While there are relatively few established offerings, the interest from energy suppliers is very strong. RWE (and its subsidiary businesses in Germany) has one of the most established residential storage offerings from an energy supplier, and has added energy storage to their existing Smart Home and Solar PV portfolios – a route that other companies are following.  Other energy suppliers who have already entered the residential storage market include Eneco (Netherlands / Belgium); E.ON, EnBW, EWE, Lichtblick (to name a few in Germany); CKW and BKW (Switzerland).   

It’s a marathon, not a sprint

Most energy suppliers will struggle to move quickly and anticipate customer needs, and opportunities in a way smaller start-ups or distributors can do. At least in the near term the energy storage market will be a harder nut to crack than the solar PV market was. The paybacks for customers are simply not very attractive and there’s a relative lack of subsidy for energy storage. 

So to make it attractive for customers, developers need to find ways to tap into other values such as ancillary services and wholesale markets. This plays into the energy suppliers strengths. However, – and this is crucial – if energy suppliers wait for partners and the market to come to them, they will miss out. The big prizes are probably a few years away but to have a chance to capture them, energy suppliers need to be active today. Or the market will pass them by once again, and history will repeat itself – but this time for energy storage rather than solar PV.

Personally, I think energy suppliers will be able to play a crucial role in commercialising new business models for energy storage – and one of the objectives of Delta-ee's Energy Storage Research Service is to help our subscribers achieve this. 

To find out more please contact Julian.Jansen@delta-ee.com.