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The Battle for the End Consumer: Residential PV and Battery Business Model Innovations in Germany

Roberto Rodriguez Labastida — June 29, 2017

While solar capacity additions in Germany have collapsed in recent years, the range of innovative residential energy solutions based on solar PV and batteries has blossomed. In recent months, battery OEM SonnenBatterie has introduced a free refills battery solution, while E.ON has introduced a batteryless electricity storage service.

The VPP Approach with SonnenBatterie

Sonnen’s solution, called sonnenFlat, allows the buyer of a Sonnen battery to opt in to sonnenCommunity. This is an independent virtual power plant (VPP) consisting of Sonnen battery owners and Enerix solar systems. The solar and battery assets are optimized to reduce the need to buy electricity from Germany’s wholesale market and to enable participation in Germany’s ancillary services markets.

A residential battery owner joining sonnenCommunity receives a €1,875 ($2,100) discount off the battery price. If purchased together with a PV system, they also get up to 6,750 kWh of free grid electricity on top of the electricity generated by the PV system. This is the approximate number for customers that bought a residential system with 9.5 kWp of PV and a 10 kWh battery, which cost around €27,200 ($ 30,500).

E.ON Envisions a Battery-Free Home

E.ON’s solution seeks to eliminate the battery altogether—at least in the customer’s home. The SolarCloud service offers to store the electricity generated by the customer’s PV system virtually in the grid and return it when needed by the customer (at night or on cloudy days, for example). E.ON charges a €21.99 ($24.60) monthly fee for this service (for a 4 kWp installation). If this service sounds familiar to US readers, that’s because it is net metering—but at a cost.

In essence, Sonnen is offering free electricity with its hardware and E.ON is offering free (virtual) hardware for a flat fee. Both aim to help their customers to reach 100% solar self-consumption (on a net basis).

The Battle for the End Consumer

Although E.ON and Sonnen are very different types of companies, nowadays they are battling each other for the long-term ownership of the customer relationship. From its background as a traditional power utility, E.ON knows that any customer who installs a PV plus battery system at home is a lost customer for at least 10 years (the lifetime of residential batteries). E.ON is therefore willing to use its energy trading capabilities to create a product that replicates what a battery offers.

Sonnen approaches the issue from a different direction. It knows that battery technology is being commoditized and therefore it cannot compete in the long term against utility players without monetizing the services its batteries can provide to other energy users and the grid. Hence, Sonnen has had to become a virtual utility to sell its hardware.

Regulation Matters

This sort of competition between traditional utilities and newcomers is something we expect to witness more and more as the Energy Cloud evolves. It is also important to highlight the key role of Germany’s energy market regulation in allowing this type of innovation. The German market was unbundled years ago with short intraday call auction times (15 minutes). It allows aggregators to participate in the market—and importantly, there is no capacity market. This allows companies like Sonnen to offer free electricity to their customers, which is paid for by trading the customer assets in the wholesale and ancillary services markets.

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