Cleantech Market Intelligence
Sweden Looks to Stimulate Residential Storage with New Subsidy
Greater interest in the benefits of distributed energy storage systems (ESSs) is growing out of successful deployments around the world. The leading markets for residential ESSs have all seen some level of government support (typically in the form of subsidies to reduce the upfront investment required). Joining a growing number of countries, the Swedish government recently announced a new subsidy program to support its residential ESS development.
There has been little energy storage market activity in Sweden to date; however, the country has set an ambitious goal to eliminate all fossil fuels used for electricity generation by 2040. Swedish officials hope that much of the new generation capacity will come from solar PV, and distributed ESSs will allow for a smooth integration while improving the Swedish grid’s resiliency. The new subsidy will be among the most generous in the world, covering potentially 60% of the cost to install a system, up to $5,600 per customer. The program is scheduled to run until the end of 2019, with a maximum $19.6 million budget that could result in 3,500 new systems and over 25 MWh of new ESS capacity.
Support Is Key
Residential ESS deployments to date have been heavily concentrated in four countries, each with some level of financial support for the technology. Navigant Research’s recent Residential Energy Storage report explores conditions supporting the market’s growth worldwide.
One of the largest markets to date has been Australia, where the country’s Capital Territory is looking to support 36 MW of new residential ESS capacity. Customers in that state can apply for a subsidy of $527 per kW of a system’s capacity, likely to cover around 20% of upfront costs.
Although the United States is emerging as a leading market for residential ESSs, nearly all systems deployed in the country are located in California. The state’s market is supported by subsidies through the Self-Generation Incentive Program, which was recently reformed and extended through 2019. The program has a budget of $270 million, 75% of which is set to fund energy storage projects, with 15% specifically reserved for residential systems (less than 10 kw), providing approximately $600 per kWh of storage capacity. So far, the program has supported roughly 1.8 MW of residential ESS capacity, with another 7.5 MW in the pipeline.
Highlighting the geographic diversity of the residential ESS market, the two largest markets to date have been Germany and Japan, both of which have run subsidy programs for several years. After some debate about whether to continue the program, German officials elected to continue subsidizing residential ESSs through the end of 2018. That program may cover approximately 30% of a system’s cost when tied to solar PV.
Japan is home to the most generous residential ESS subsidy worldwide. The country’s Ministry of Economy, Trade, and Industry offers over $9,000 in incentives toward the installation of a lithium ion ESS for homeowners. Notably, this is the only subsidy targeting a specific battery chemistry, as the country looks to become a world leader in lithium ion technology.
Ready to Grow
Subsidies have been key for the residential ESS market to date, as the technology requires further decreases in costs to see widespread adoption. However, most subsidy programs will end before 2020 and are unlikely to be continued if battery system costs continue to fall as expected. Navigant Research expects that the residential ESS market will begin to see much more dramatic growth in the next 2 to 5 years as falling system costs combine with reduced solar PV incentives to greatly increase the value of these systems.