Germany seeks to unleash storage innovation
Germany is on the cusp of an energy storage boom. The country has long suffered with grid problems as it struggles to move large amounts of renewable energy produced in the north of the country – including from offshore wind farms – to areas of high demand in the south.
This challenge is getting bigger. Last year, 46% of German electricity came from renewable sources, and this will grow as the government seeks to close nuclear power plants by 2022 and coal-fired power stations by 2038. That means more wind and solar on the grid, and a more pressing need to manage the intermittency they introduce.
But these are challenges that energy storage could help fix, and there is willingness to embrace storage in the from of supportive government policies, strong industrial players and demand from energy users. This should open the way for standalone storage, and storage co-located with wind and solar farms. In this context, what should we expect to see in Germany in the coming years?
The first trend we see is a significant level of consumer demand. This was one of the major driving forces in the early days of German wind and solar, and we now see similar happening in storage.
This month, German solar trade association BSW-Solar reported that demand for residential battery systems grew 47% in 2020. This is the third consecutive year of growth at this rate.
Estimates as to the number of residential storage units in use in Germany vary. BSW-Solar says that 88,000 residential energy storage systems were installed in Germany in 2020, which is up from 40,000 and 60,000 in 2018 and 2019 respectively. They say the total number of installed residential storage systems in Germany now stands at 270,000.
However, Germany’s Federal Network Agency reported that 80,000 new battery systems totalling 775MW were registered in 2020, to take the total capacity to 175,000 systems with a capacity of 1.4GW.
Despite the statistical variations, the trend is clear: residential storage is on the increase, largely due to a solar storage rebate scheme that has been in operation for the last five years.
But residential systems aren’t enough. The country needs to see growth in utility-scale battery storage systems too.
We have not seen much momentum in this part of the market in recent years.
For example, battery consultant ACCURE reported that only six utility-scale energy storage projects were put into operation in 2019 (taking the total capacity to 616MWh). This is a lower number than the 22 systems installed in 2018. It has not yet released figures for 2020.
ACCURE put the 2019 slump down to fast falling prices in frequency containment reserve (i.e. the electricity reserves needed to manage frequency deviations in the EU Internal Electricity Balancing Market),which has been the main source of finance for utility-scale storage systems in Germany.
However, it has also predicted growth in the coming years for two reasons.
The first reason is growing demand for energy storage as a form of ‘virtual transmission’. Firms such as Fluence have argued that batteries could be used to defer or replace upgrades to power grids in Germany and other countries. This could unlock 450MW of storage schemes.
The second is a new system of Federal Network Agency ‘innovation tenders’, which ACCURE said would support the rollout of several hundred megawatts of utility-scale storage in the coming years.
Indeed, we saw this in September when the Federal Network Agency backed projects with a combined capacity of 667MW in its first innovation tender.
Of the successful bids, 394MW were hybrid projects - and 27 of these hybrid projects were solar-and-storage specifically. In total, of the 1GW of bids the Federal Network Agency received, a total of 83 bids (representing 785MW) were for hybrid projects. This shows there is demand for hybrid projects, which usually include a storage element, and that the government has the policy measures in place to help unlock them.
This should help unleash utility-scale storage in Germany in the coming years.
And there are other factors at play too.
As well as supporting the rollout of storage projects, the government has also committed to supporting new battery production facilities.
It announced in June 2020 that it would provide €1.5bn of support for such facilities, and has designated €2.5bn of funding to support new electric car-charging infrastructure. It is looking to capture a slice of a battery storage market that could be worth €250bn a year by 2025, so it makes sense to support both supply and demand.
There is also space available for storage in Germany. Utility-scale energy storage facilities need large unoccupied sites that can access the power grid infrastructure. The closure of fossil fuel power plants has opened up such sites. And it has renewable and industrial players that want to take advantage.
Germany hasn’t yet been a big-hitter in terms of utility-scale storage installations, but expect to see a significant increases in such facilities by the middle of this decade.