2024 — The year of the (home) battery?
Introduction
A home battery is a battery used to store energy for later use in your home. It’s similar to your phone’s battery; when you charge your phone’s battery, you are storing energy to use later.
However, home batteries can store much more energy than your phone. For example, an iPhone has a battery of 15 Wh, which stands for 15 watt-hours. A home battery starts at around 5000Wh, or 5kWh, which is over 330 times more than an iPhone!
For example, an average house in the Netherlands uses about 10kWh per day, so with a 5kWh battery, you could provide energy to your house for half a day.
Different types of home batteries
The most well-known battery is the lead-acid battery, an ancient technology invented in 1859. It’s a simple battery, capable of delivering high current, easy to recycle, and relatively inexpensive. You can find this battery in your gasoline or diesel car as a starter battery. The first electric car (1888) even ran on a lead-acid battery.
The lithium-ion (Li-ion) battery, which became popular through its use in mobile phones and is often used in consumer electronics and electric cars, is favored for its high energy density and relatively long life span, especially when charging and discharging at high power. The advantage is that it can store a lot of energy per kg, has no memory effect, can charge and discharge at high power, and has a relatively long lifespan. A lithium-ion battery should never be discharged or charged too much, as this can drastically reduce the battery’s capacity over time or even lead to a fire. The best-known Li-ion compositions are: lithium cobalt oxide (LiCoO2) and lithium manganese oxide (LiMn2O4, Li2MnO3, or LiMnO).
The lithium nickel manganese cobalt battery (Li-NMC) is the most used battery in electric vehicles. (It’s actually a lithium-ion battery with nickel, manganese, and cobalt in the cathode). This battery can store a lot of energy, slightly more than a lithium iron phosphate (LiFePO4) battery. However, its lifespan is shorter than that of an iron phosphate battery. The battery can be found in the Hyundai Kona, Nissan Leaf, Jaguar I-Pace, Renault Zoe, and the Volkswagen ID.3. Tesla uses a lithium nickel cobalt aluminum (Li-NCA) or lithium nickel manganese cobalt (Li-NMC) battery in its electric cars. The Li-NCA battery has a higher energy density than LiFePO4.
The lithium iron phosphate battery (LiFePO4) is the most used battery for home batteries. The battery can be charged and discharged at high power, has a long lifespan (many charge cycles), high energy density, and most importantly, is safer and more stable than other lithium-ion-based batteries. The battery can operate in a wider temperature range than lithium-ion or lead-acid batteries and will maintain a higher energy density. They can withstand extremely high temperatures and there is little to no risk of explosions in the event of overcharging, overheating, short-circuiting, and damage. This is in contrast to both lithium-ion and lead-acid batteries.
Video about safety of different battery chemistries:
Use cases of home battery
Energy cost savings
Home batteries can store electricity when rates are low, typically during off-peak hours, and then supply energy during peak hours when electricity rates are higher. This practice, known as “time-of-use load shifting,” allows homeowners to save money on their energy bills. For instance, a battery can be charged overnight using cheaper, off-peak electricity, and then used during the day to power a home, reducing the need to purchase more expensive daytime electricity.
Solar energy optimization
For homes with solar panels, a battery can store excess solar energy generated during the day, which would otherwise be fed back into the grid. This stored energy can be used in the evenings or during cloudy days, maximizing the use of solar energy and reducing reliance on the grid. This is particularly beneficial in locations without net metering policies, where homeowners may not receive favorable credits for the excess energy they generate.
Emergency backup power
In the event of power outages, a home battery can provide critical backup power. This is especially useful in areas prone to natural disasters or frequent power interruptions. The battery can power essential appliances such as refrigerators, lights, and medical equipment, ensuring comfort and safety until the grid power is restored.
Grid services
Home batteries can contribute to grid stability by participating in demand response programs. Homeowners can allow utility companies to draw power from their batteries during times of high demand. This helps balance the grid load, prevents overloading, and can even earn homeowners incentives. Additionally, batteries can be used for load balancing within the home, reducing the overall demand from the grid.
Energy independence
For those seeking energy independence, home batteries are a key component. In combination with renewable energy sources like solar panels, batteries enable homeowners to operate off-grid, free from utility companies. This is particularly appealing in remote areas where grid access is limited or unreliable. Off-grid living requires careful energy management, but with a well-designed system, it’s entirely feasible to power a home year-round.
Growth of home batteries installations
The outlook for household solar and storage in Europe is highly optimistic, with projections indicating a significant expansion in the coming years. The installed storage capacity is expected to grow by over 400%, from 3 GWh in 2020 to an estimated 12.8 GWh by 2025¹.
The year 2020 marked a significant milestone in the European energy transition, with a 44% increase in the installation of residential solar and storage units, totaling 140,000 units. This was the first time the number of storage systems installed in Europe surpassed 100,000 in a single year, also marking the first instance of the annual installation capacity reaching the GWh scale.
In Belgium, the shift to changing grid capacity tariffs has significantly boosted the installation of home batteries. Energy suppliers, adapting to these changes, are increasingly offering home battery solutions to their customers. This move is primarily driven by the economic benefits for consumers, as the new tariff structure incentivizes the use of stored energy during peak demand times. By leveraging home batteries, consumers can effectively reduce their grid capacity costs under the new tariff system, making the installation of these batteries more attractive and financially viable. The Flemish government, recognizing the potential of home batteries in improving energy efficiency and reducing dependence on the grid, introduced incentives to encourage their adoption. These incentives included a premium for the purchase of home batteries, which has been quite successful. For instance, more than 11,000 home batteries were installed in 2021⁷, a dramatic increase from the 337 installations in the whole of the previous year. In 2022 Fluvius, the DSO of Belgium, reported the installation of 52.196 home batteries.
In 2023, there was a significant increase in the use of home batteries in Germany, mainly by households with solar panels. A record-breaking 573,000 home batteries were installed, showing a massive 172% rise in sales compared to previous years. This boost has led to Germany exceeding 1 million home batteries in total. These batteries can store enough power to meet the daily electricity requirements of 1.5 million average two-person homes. The growth in home battery installations in 2023 has been extraordinary. The total number of solar batteries and their storage capacity has doubled in just one year. Now, these batteries can store about 12 gigawatt-hours of energy.
Price drops (and forecast)
The prices of (electric vehicle) batteries have been experiencing a notable decline. According to Goldman Sachs Research², the cost of these batteries is anticipated to decrease to $99 per kilowatt hour (kWh) by 2025. This represents a 40% reduction from the prices in 2022³. The decline is attributed to falling prices of raw materials like lithium, nickel, and cobalt, contributing to almost half of this decrease. The forecast suggests an average annual price drop of 11% from 2023 to 2030. This reduction in battery costs is expected to lead to more competitive EV pricing, wider consumer adoption, and growth in the markets for EVs and batteries.
In line with these observations, BloombergNEF reported a 14% drop in the price of lithium-ion battery packs from 2022 to 2023⁴, reaching a record low of $139/kWh. This price drop was driven by a decrease in raw material and component prices, alongside increased production capacity throughout the battery value chain. However, demand growth was weaker than some industry expectations. For battery electric vehicle (BEV) packs specifically, the prices were $128/kWh on a volume-weighted average basis in 2023.
Additionally, TrendForce reported that Chinese electric vehicle cell prices fell by 50% by the end of 2023 compared to the beginning of the year⁵. This significant drop was due to a combination of lower-than-expected market demand and rapid capacity expansion, leading to oversupply and inventory buildup. Despite this substantial decline, prices are expected to stabilize in the second half of 2024 as the EV market is projected to grow.
CATL’s introduction of new rectangular LFP batteries is significantly impacting the EV battery market. These larger batteries, comparable to six Tesla 4680 batteries each, are driving prices down rapidly. Currently, the LFP battery price in China is around $70 per kWh, but it’s expected to drop below $56 per kWh within the next six months⁶. Further reductions are anticipated, potentially reaching as low as $36 per kWh by next year. This price trend began in early 2023 when prices were between $110–124 per kWh. These developments are particularly beneficial for EV manufacturers like Tesla, which is already seeing cost savings on battery expenses compared to last year and anticipates further reductions in the coming months.
The decreasing costs of batteries, particularly highlighted by CATL’s recent price reductions for LFP batteries, are enhancing the economic viability of home battery systems. As battery prices continue to fall, the concept of ‘stacking’ various applications for home batteries becomes more attractive, increasing the practicality and appeal of installing such systems in residences. The marked reduction in LFP battery costs, commonly used in home energy storage, is expected to significantly contribute to the growth and affordability of these home energy solutions. This trend aligns with the broader developments in the EV battery market, where costs are also decreasing, leading to wider adoption and accessibility. This might make 2024 the year of the home battery boom in Europe!
What’s next? Subsidy and legislation is key
Legislation plays a crucial role in the adoption and effectiveness of home battery systems, both economically and technically. Economically, government policies and incentives can significantly lower the cost barrier, making home batteries more accessible to a wider range of consumers. This includes tax rebates, subsidies, and financial assistance programs. Technically, legislation helps standardize safety protocols and installation procedures, ensuring that home batteries are integrated safely and efficiently into the electrical grid. Regulations also facilitate the development of ‘smart’ grid systems, where home batteries can play a vital role in energy management and distribution, enhancing the overall stability and sustainability of the energy system.
The impact of subsidy decisions on the adoption of home batteries and EVs is significant, as seen in the case of Germany’s recent changes to its EV subsidies. The German government’s abrupt cessation of the 4,500 euro EV subsidy, initially slated to run through 2024, due to budgetary constraints, serves as a stark example. This policy change led to a noticeable decline in EV sales, underlining how such legislative shifts can directly influence market behavior. Similar dynamics apply to home batteries, where changes in tax benefits and subsidies can either stimulate or hinder market growth. Therefore, legislative support and stability are key drivers for the adoption and economic feasibility of both EVs and home batteries.
The discontinuation of the subsidy for home batteries in Flanders marks a significant change in the landscape of renewable energy incentives. As of March 31, 2023, the Flemish government has ceased offering this subsidy for new home battery installations, signaling a shift in policy priorities. While the subsidy had been instrumental in encouraging the adoption of home batteries and promoting self-generated energy usage, its discontinuation underscores the evolving dynamics in the renewable energy sector.⁸
In the Netherlands, Dutch Minister Rob Jetten has proposed an initiative to research and implement measures aimed at preventing power outages by influencing household energy consumption. This strategy involves the use of dynamic pricing to encourage consumers to adjust their energy usage⁹. Prices for electricity would increase during periods of potential grid overload and decrease when the risk is lower. This marks a shift from the typical fixed-price energy contracts most citizens currently have. Additionally, Jetten is advocating for the remote control of devices such as charging stations and heat pumps by network operators. This control would allow the network operators to decide when these devices can be used in households.
The year 2024
The future attractiveness and adoption of home batteries will be significantly influenced by legislative measures, which will play a vital role in determining their feasibility and appeal for homeowners. Just as with solar panels, where legislative support and decreasing costs led to widespread adoption, a similar trend is anticipated for home batteries. If legislation is favorable, it could provide incentives or remove barriers for homeowners to invest in these energy storage systems. Moreover, as the prices of home batteries continue to drop, paralleling the trajectory once observed with solar panels, the demand for and willingness to install home batteries are expected to rise. This economic factor, combined with legislative support, could potentially lead to a substantial increase in the installation of home batteries, as homeowners seek to optimize energy usage and contribute to a more sustainable energy ecosystem.
The outlook for home batteries in 2024 is one of exponential growth, driven by a confluence of factors that are aligning to make these energy storage solutions more attractive and accessible than ever before. This surge in growth is expected to be fueled by continuous advancements in battery technology, leading to more efficient and cost-effective solutions. Additionally, increasing environmental awareness and the push for sustainable living are prompting homeowners to seek renewable energy sources, with home batteries playing a crucial role in maximizing the use of these resources. The combination of favorable government policies, incentives for green energy, and a growing recognition of the long-term economic benefits of energy independence further bolsters this trend.
As a result, 2024 is poised to be a pivotal year where the adoption of home batteries shifts from a steadily growing interest to a widespread, mainstream phenomenon, mirroring the rapid expansion once seen in the solar panel market.
[1]: Solar Power Europe (2024). European Market Outlook for Residential Battery Storage 2021–2025 https://www.solarpowereurope.org/insights/thematic-reports/european-market-outlook-for-residential-battery-storage-2021-2025
[2]: Electric car battery prices are going back down faster than expected (2023) https://electrek.co/2023/11/20/electric-car-battery-prices-falling-faster-expected/
[3]: Electric vehicle battery prices are falling faster than expected (2023) https://www.goldmansachs.com/insights/pages/electric-vehicle-battery-prices-are-falling-faster-than-expected.html
[4]: Battery Pack Prices Fall to an Average of $132/kWh, But Rising Commodity Prices Start to Bite (2021) https://about.bnef.com/blog/battery-pack-prices-fall-to-132-kwh-but-increasing-materials-prices-pressuring-cost-reductions/
[5]: EV battery prices fell by 50% at end of 2023, says TrendForce (2024) https://www.pv-magazine.com/2024/01/04/ev-battery-prices-fell-by-50-at-end-of-2023-says-trendforce/
[6]: EV LFP Battery Price War at Less Than $56 per kWh Within Six Months (2024) https://www.nextbigfuture.com/2024/01/ev-lfp-battery-price-war-w-55-in-six-months.html
[7]: High electricity prices: 30 times more home batteries installed than last year( 2021) https://www.brusselstimes.com/belgium/192626/high-electricity-prices-30-times-more-home-batteries-installed-than-last-year
[8]: Premie voor de aankoop of leasing van een thuisbatterij voor zelf opgewekte energie (2023) https://www.vlaanderen.be/zonnepanelen/thuisbatterij/premie-voor-de-aankoop-of-leasing-van-een-thuisbatterij-voor-zelf-opgewekte-energie
[9]: Overbelasting stroomnet raakt nu ook huishoudens, kabinet grijpt in (2024) https://fd.nl/bedrijfsleven/1503908/overbelasting-stroomnet-raakt-nu-ook-huishoudens-kabinet-grijpt-in
