Residential Battery Storage - Reshaping the Way We Do Electricity

70 Pages Posted: 30 Sep 2022 Last revised: 25 Feb 2025

See all articles by Christian Kaps

Christian Kaps

Harvard University - Technology & Operations Management Unit

Serguei Netessine

University of Pennsylvania - The Wharton School

Date Written: February 25, 2025

Abstract

In this study, we investigate households’ investments in behind-the-meter battery storage alongside rooftop solar and examine the effects of these batteries on consumers, the power market, and environmental emissions. We answer three main research questions: 1) Beyond financial aspects, how much do behavioral motivations drive technology adoption of residential storage; 2) How does residential storage impact consumer autonomy and the grid provider; 3) What effects do solar and storage have on carbon emissions. We develop a structural estimation model of residential electricity usage that separates observed demand and consumption preferences and lets us estimate a non-financial utility that households may have for using self-generated solar power over grid-procured electricity. We call this utility nonmarket valuation, provide evidence
that it is driven by sustainability and autarky desires, and relate it to the early adoption of residential storage. Applying this model to a novel data set of German households, we find that the median household has a nonmarket valuation of 0.29 per kilowatt hour (kWh). We then show that owning storage increases a household’s electricity demand (storage rebound ) and marginally increases the emissions by 57 kg CO2 / year / kWh of battery capacity. However, batteries may reduce emissions if solar penetration in the grid is sufficiently high. Lastly, we estimate that, at future technology costs, 2023 European electricity prices, and without subsidies, investing in storage is optimal for 54% of households, which would reduce the residential grid load by 38%, but, counterintuitively, also make it more variable.

Keywords: Energy Storage, Solar, Sustainable Behavior, Structural Estimation, Residential Solar

Suggested Citation

Kaps, Christian and Netessine, Serguei, Residential Battery Storage - Reshaping the Way We Do Electricity (February 25, 2025). Available at SSRN: https://ssrn.com/abstract=4219247 or http://dx.doi.org/10.2139/ssrn.4219247

Christian Kaps (Contact Author)

Harvard University - Technology & Operations Management Unit ( email )

Gordon Rd
Boston, MA 02163
United States

Serguei Netessine

University of Pennsylvania - The Wharton School ( email )

3730 Walnut Street
Philadelphia, PA 19104-6367
United States
(215) 573 3571 (Phone)

HOME PAGE: http://www.netessine.com

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