Residential Battery Storage - Reshaping the Way We Do Electricity

Abstract

In this paper, we aim to understand when private households invest in behind-the-meter battery storage next to their rooftop solar and how these installation decisions affect their electricity usage patterns and the market structure overall. We answer three main research questions: 1) What drives customers to combine solar power with storage installations; 2) How does privately-owned storage change consumer autonomy and the grid provider business model; 3) What effects do subsidies have on investments, demands, and carbon emissions. We develop a structural estimation model of residential electricity usage that allows us to estimate a household's consumption preferences throughout the day, and a non-financial utility the household has for using self-generated solar power over grid-procured electricity; we call this utility greenness valuation. Applying this model to a novel, proprietary, big-data-set of German households, we find the median household to have a greenness valuation of 0.29€ per kilowatt-hour(kWh). We further find that this sustainability-related valuation in the population follows an exponential distribution and helps explain the early adoption of behind-the-meter batteries. We then show that, in the future, at electricity prices of 38 cents/kWh, a rate seen in Europe in 2022, investing in solar and some amount of storage is optimal for 72% of households, even without any greenness valuation or government ESG subsidies. Such an adoption level would reduce household grid-energy purchases by 43% but counter-intuitively also make grid load more variable throughout the year. Lastly, we quantify the amount of carbon saved per subsidy dollar spent for the households in the data-set to be 615€ per metric ton. We show that storage subsidies are up to five times more efficient than solar in reducing emissions today and that this disparity further widens as renewable penetration increases in the future.

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