FITs a disincentive to selling power back to grid

August 2, 2013 | By Barbara Vergetis Lundin

The market for residential photovoltaic (PV) energy storage systems is expected to boom in the coming years, with cumulative installations totaling 2.5 GW by 2017, according to IHS. Germany will lead the growth, which will be driven by the changing nature of feed-in tariffs.

Credit: IHS

Traditionally, financial incentives and subsidies, such as feed-in tariffs (FIT), have made it financially attractive for end users to send their excess electricity to the grid. However, this is now rapidly changing in many countries where incentives are subject to regular reductions following higher-than-anticipated growth in installations, and recent reductions in PV system prices. These reductions, coupled with continually increasing retail electricity prices, mean that self-consumption of energy on-site is a more desirable option for home owners.

"Residential PV customers are striving to maximize their own consumption of the energy they are generating," said Abigail Ward, PV analyst at IHS. "This is because rising electricity prices and decreasing feed-in-tariffs are serving as a disincentive for consumers to export their power to the electricity grid. Such developments, combined with the introduction of the German Energy Storage Subsidy, are forecast to accelerate the overall growth of the residential solar storage market."

In Germany and the United Kingdom, FITs are declining at a steady rate. For these countries, the current FIT rate paid for electricity exported to the electricity grid has already fallen below average retail electricity rates. As a result, PV system owners pay a greater amount for electricity imported from the grid than they receive for the energy they sell. Rather than export the energy generated in order to receive the FIT, it is now financially attractive to consume the energy generated by the system on-site.

"An energy storage solution enables a PV system owner to shift energy from when it is generated to a later time for consumption," Ward said. "As a result, demand for residential energy storage products will continue to accelerate as PV energy reaches grid-parity in a number of countries."

Nonetheless, at today's prices, the financial gains to be obtained by growing self-consumption do not yet offset the increase in upfront costs associated with the addition of an energy storage solution in a residential PV system over the expected 20-year lifetime of the installation. The introduction of the German Energy Storage Subsidy, however, will help.

Not only will the incentive reduce the upfront cost of residential storage solutions deployed in Germany by up to 30 percent, it will also generate volume and price reductions achieved by mass production. IHS predicts an average cost reduction of around 45 percent during the next five years, largely due to decreases in battery prices.

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