Of course, the Germans are in on the act.
Germany finances major push into home battery storage for solar
By Giles Parkinson on 7 November 2013
(Editors note: Rather than listening to the new Australian parliament debate climate change and clean energy, RE’s editor has chosen to flee, at least temporarily, to Germany, where he has discovered that the majority of the population believes that the planet is, in fact, round. This is the first of a series of articles on Germany’s energie-wende, its energy transition that will likely have a major influence on the pace of change in the rest of the world. Many want it to succeed, some want it to fail).The German government has responded to the next big challenge in its energy transition – storing the output from the solar boom it has created – by doing exactly what it has successfully done to date: greasing the wheels of finance to bring down the cost of new technology.
Over the past five years, Germany has been largely responsible for priming an 80 per cent fall in the price of solar modules. Now it is looking at bringing down the cost of the next piece in the puzzle of its energy transition – battery storage.
At its disposal is the giant state-owned but independently run development bank KfW. It performs in the clean energy space a similar function to Australia’s recently created and imminently doomed Clean Energy Finance Corp, but at such a scale that is not contemplated in most countries other than China.
It has assets of more than €500 billion, and lent €73 billion last year – with one-third of that targeted at renewables and climate investments. Over the past three years it provided €24 billion in loans for energy efficiency investment in homes, leveraging a total investment of €58 billion, helping insulate and seal more than 2 million homes, employing 200,000 people a year and saving more than 150 million tonnes of carbon.
Six months ago, it began a new program to finance the introduction of battery storage into homes, which it says is absolutely essential if the “energiewende”, the German expression for its energy transition – is to successfully move to the next phase and beyond 40 per cent renewable penetration.
The energy storage financing program has generated a higher than expected response. Already 1,900 homes and small businesses have put their hands up for loans and grants (provided by the Environment Ministry) to install new solar systems and a battery storage system in their home. Around €32 million in loans has already been allocated and €5 million in grants, about 10 per cent of the sums allocated in the initial phase of the program.
Unlike the subsidised uptake of solar PV enabled by the deployment of generous feed-in tariffs, the support mechanism for energy storage is more cautious. Indeed, KfW is looking for investors who are ready to be “pioneers” and early adopters, and willing to take a loss on their investment.
“The market for energy storage systems is very young … batteries are still very expensive … and the economics don’t yet work,” program manager Dr Holger Papenfuss, told
RenewEconomy in an interview in KfW’s sprawling headquarters in Germany’s financial centre of Frankfurt this week.
In fact, even with the assistance of the loans and grants, it is still not economically viable. Which is why KfW has stepped in to ensure that the commercial banks provide the funds for development.
The program is relying on “early adopters” and “renewable pioneers” – the same profile that were the first to get into electric vehicles, or solar panels a decade ago – who have the money and are willing to accept a negative return on their investment. Right now, Papenfuss says, people would be better off selling power to the grid.
So what’s motivating them? Being independent of the large power producers, and hedging bets in the face of rising electricity prices.
According to Papenfuss, households will spend between €20,000 and €28,000 on solar and battery, depending on the size of the system. The battery component – it is targeting lead acid and lithium-ion batteries – is between €8,000 and €12,000, and the grants for this average around €3,000 (or about 30 per cent of the battery cost).
The average loan for the whole system is around €17,000, but it is not offered at a discount. At just 1.5 per cent, the interest rates probably don’t need to come down any lower in any case. KfW’s function is to simply ensure that funds are made available for deployment by commercial banks, who may not touch an unprofitable venture otherwise.
Papenfuss says KfW is targeting 20,000 to 30,000 under its loan program, suggesting a commitment of at least €300 million.
KfW’s aim, according to Axel Nawrath, a member of the KfW Bankengruppe executive board, is to ensure that the output of wind and solar must be “more decoupled” from the grid. Which means that the grid is not necessarily required to accept the output just because the wind happens to be blowing a lot at the time, or the sun is shining.
“The success of the energy turnaround will entirely depend on integrating electricity from renewable sources into our energy system on a reliable, permanent basis,” he said in his announcement earlier this year.
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