Free Electricity! (or how home batteries could disrupt everything everywhere)

Our power systems are changing - and energy storage is set to have an increasingly important role

By George Smeeton

Information on this page correct as of:

Fancy free electricity? Want to be rid of those pesky energy companies asking you for money every month/quarter? Then there’s a simple way. Move to Germany.

Home batteries like the Tesla Powerwall are becoming increasingly popular. Image: Pasco Olivier, creative commons licence
Home batteries like the Tesla Powerwall are becoming increasingly popular. Image: Pasco Olivier, creative commons licence

Unbelievably, German home battery manufacturer Sonnen has just launched a product offering that means you, the consumer, can receive free electricity for 10 years.

Yep, you read that right - 10 - years.

All you have to do is buy the battery (for €3,999) and become part of the Sonnen energy community of household producers and storers (imaginatively named - wait for it - the “sonnenCommunity”), allowing your battery to soak up or spew out electricity as and when needed. It’s limited to 5000 sales, but is surely a sign of where the home battery market could head in other countries.

Indeed, Sonnen is about to perform the same trick in Australia. It could earn more money from the Aussie national grid for balancing services than from households - households will again just pay for the battery and get free electricity.

Lessons from abroad

As we’re all now well aware, just as in Germany and Australia, energy storage is the next piece of the puzzle that will be slotted into the UK’s energy system. The sun shines, the wind blows, the tide comes in - add storage to the mix and burning fossil fuels will seem so last century.

In a digitally connected ‘smart’ world, grid balancing will be done by algorithms, and part of this process will involve instructing thousands of energy storage devices to either import or export electricity. As a by-product, we would be richer as well - the National Infrastructure Commission estimated consumers collectively could save up to £8 billion a year. Eight Billion!

Grid balancing has historically been all about matching supply to demand, but in the future will be as much about matching demand to supply, and that supply may not come directly from the normal operators. Not only will big centralised coal power stations be fossils, but if the sun isn’t shining/wind not blowing/uranium not splitting, then that electricity is likely to come from one of the millions of batteries that will become part and parcel of everyday life.

And there’s a good chance one of those batteries will be in your house.

The UK has some 3.23 GW of storage projects (as of August 2016, including pumped hydro), but the vast majority of this is found "in front of the meter" - in other words, it's connected to the grid, not a private add-on in the home or business. Included in this figure are some 1500 household installations though, all of which have an associated solar array somewhere near them.

To give this some idea of this market's potential, there are an estimated 34,000 household batteries in Germany already. Australia installed 6500 household systems last year. Indeed, Bloomberg New Energy Finance estimates that the global household battery market will become worth $250 billion by 2040.

Ageing infrastructure

Regardless of how many batteries are installed worldwide, you may question why millions of home batteries would be installed in the UK. After all, the grid works fine, doesn’t it?

Well, yes and no. The district network operators (DNOs) of this country - the companies that get electricity from the pylons into your homes - are struggling to update their infrastructure to deal with increasingly variable loads given the amount of decentralised solar and wind generation going into their systems. As of the end of 2015, around 26% (24GW) of the UK’s total generation capacity was directly connected to the DNOs' networks. Around a million homes have solar panels, and that figure is only going in one direction.

Large-scale energy storage systems help balance electricity supply and demand. Image: Portland General Electric, creative commons licence
Large-scale energy storage systems help balance electricity supply and demand. Image: Portland General Electric, creative commons licence

And those panels are useful as they not only produce free electricity, but they help the nation's collective wallet, given that we’re a net importer of energy.

And voila! Our first disruption presents itself. At the risk of sounding too obvious, the energy utility companies make more money the more electricity you use. Use less, and their turnover and profits diminish.

Centrica (owner of British Gas) has recognised this. It has set up a smart micro-grid trial in Cornwall (incorporating batteries), in effect positioning itself to be ready for the future UK energy system. Indeed, it has acquired at least 9 distributed energy companies to help this positioning.

You could argue that in the short-term it'll be disrupting itself - but in the long run, companies adapt or die.

Home and business batteries also guarantee the local lights stay on if there is a blackout, but the value of this varies wildly (this London Economics report attempts to quantify this).

If I lose electricity for a few hours in my house, the worst that can happen is all the food in my freezer defrosts. How much would I pay to protect against that? I’m no Jamie Oliver, so I need that stack of pizzas-on-demand. It would be annoying, but not life-threatening like, say, in a hospital where the backup currently comes from diesel generators.

You can easily see how new sales of diesel generators (and by extension, diesel) will start to slide. Another market disrupted by batteries.

Interestingly, it’s presumed that battery owners will have some associated solar panels. In theory, there’s no need for this though. Home batteries have the ability to absorb electricity when it is cheap (say, on a windy night - and the UK is windy), and spew back to the grid when it’s expensive, pocketing the difference. This is one of the positives marketed by the current home battery market players.

However, this will only be a short-medium term effect, as the more storage there is on the system, the less expensive electricity an individual battery can soak up, and the less financial gain an individual unit can make. So batteries actually disrupt themselves. And, presuming batteries are not colluding with each other, they also form a perfect market that eventually evens out the wholesale price, disrupting electricity traders.

Should millions of home/business batteries be installed, then both the morning and evening peaks would seriously flatten out in the summer, and the winter evening peak would also sag.

But the winter morning peak would still exist. Why? In summer, batteries would fully charge up during the day, but then we may not get round to using all that electricity by the time the sun rises the next day and the cycle starts again. Conversely, in winter, less sun means the battery may not get to full charge, and then as we demand more electricity from it it would fully deplete - meaning we would still rely on the grid for the morning peak. The UK capacity market is designed to cover peaks between 4pm and 7pm November to February. Disrupted (but probably moved 6am-9am).

Disruptors disrupted

Renewables and energy storage combine to disrupt conventional power systems. Image: National Grid, creative commons licence
Renewables and energy storage combine to disrupt conventional power systems. Image: National Grid, creative commons licence

However, the above paragraph presumes that batteries are unidirectional, but that doesn’t have to be true.

Whilst we know that sun only shines in the day, the wind can blow at any point. Should that be at night, those batteries can absorb the excess produced by wind farms via the grid, providing us with our morning heat and light.

But that deduction only works if something else isn’t absorbing that energy, such as your electric car battery, or even a grid-level battery connected directly to the wind farm. All of a sudden, you can see how different types of batteries all start disrupting each other. And you need a crystal ball or a (PhD in energy economics) to predict what the final combination of the three types would be.

Taking this further; since renewables have zero marginal costs (because the wind and sun are free), they depress wholesale power prices, which in turn lowers revenues for all generators - and lower revenues means lower profits for generators. This is partly why the capacity market was needed in the first place - to ensure generators that would ordinarily have shut up shop could cover the peaks when renewables aren’t generating.

Aggregate millions of batteries together, and in effect you have another source of power, but this time it’s dispatchable and also has a close to zero marginal cost of production. Conventional generators are duly disrupted.

In a similar move to Sonnen’s community, British company Moixa has started down the future utility company/grid balancing route in the UK, by offering payments to join its GridShare aggregation platform (at the moment the payment is only £50 though, not free electricity for a decade).

It suddenly becomes easy to see how batteries could be in direct competition with generators and utilities, despite not generating a single electron themselves.The effects will spiral outwards, and that’s before we even discuss how grid level and potential vehicle-to-grid storage could affect things. Whilst there are no government policies in place to encourage uptake of behind-the-meter home batteries (should there be?), it’s clear that energy storage will play a large part in our future energy system.

The future will certainly be interesting!