Although Germany is relatively close to Japan in terms of economic size and land area, its policies and introduction of renewable energy and energy storage systems are more advanced than Japan’s. In this column, we will introduce the “Battery Storage Market” published in Chapter 4 of Part 2 of the “Germany PV and Battery Storage Market” published by the German Solar Association (BSW: Bundesverband Solarwirtschaft e.V.) at Intersolar 2024 last year.

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4. 2. BATTERY STORAGE MARKET

Battery energy storage systems (BESS) are an essential pillar of Germany’s continuing transition to renewable energy, as they help balance the supply and demand of electricity by storing excess energy and releasing it when needed. They also stabilize the power grid.

The use of BESS has been rapidly increasing worldwide. As a leader in the field of renewable energy, Germany has been proactive in supporting the adoption and development of storage technology. From 2013 to 2018, the German Government provided funding at the suggestion of the German Solar Association to encourage investment in residential battery storage systems, particularly those combined with solar PV systems. After only a few years, this led to the halving of prices for stationary battery storage systems. In Germany by now, the use of battery storage systems in combination with solar power systems is generally profitable when used to optimize self-consumption.

Battery storage systems come in different sizes for various applications: residential storage systems (typically up to about 20 kWh), commercial storage systems (typically between 20 kWh and 1 MWh) and mass storage systems (larger than 1 MWh).

Residential energy storage systems:
Especially in the residential sector (typically up to 20 kWh), the declining prices of BESS, coupled with high electricity tariffs, have enhanced the appeal of these systems for self-consumption. Battery systems of this scale are readily available as standardized, off-the-shelf products, which have experienced substantial cost reductions over the past decade. Presently, the average capacity per installation stands at around 9 kWh.

Commercial energy storage systems:
Commercial BESS (typically between 20 kWh and 1 MWh) offer several advantages for businesses. These systems can assist in reducing the surplus of solar energy exported to the grid during periods of low wholesale electricity prices. Additionally, they enable the adjustment of energy output to more advantageous evening hours. Commercial BESS can also deliver various value-added services such as peak shaving, uninterrupted power supply (UPS) and integration of electric vehicle infrastructure.

Battery systems for uninterrupted power supply (UPS) have already demonstrated their reliability in commercial settings. With decreasing storage prices, the attainment of UPS and an increased self-consumption has become an attractive prospect. The commercial BESS market tends to develop more slowly than the residential BESS market, due to lower electricity prices for businesses compared to residential households.

Mass energy storage systems:
Mass BESS (more than 1 MWh) can be either stand-alone systems or can be integrated with solar PV. Mass storage systems are mainly used in the frequency containment reserve (FCR) market to ensure grid stability. As of February 2024, 810 MW of battery storage systems were prequalified to provide FCR services. Combined BESS and PV systems participate in the FCR market as well but can also be utilized to achieve higher revenues in the wholesale market. Mass BESS in combination with PV systems can receive support through innovation tenders.

4.2.1. Recent market developments

Of the 1.2 million total installed BESS in Germany, approximately 98% can be found in the residential sector. Commercial BESS account for approximately 2% and mass BESS for 0.02% of the total number of BESS. The total installed battery capacity amounts to 12.3 GWh, with residential BESS comprising 82%, commercial BESS accounting for 6% and mass BESS making up the remaining 12%.

Figure 13: Total installed BESS in Germany by the end of 2023

The installed capacity of BESS has seen rapid growth over the last decade. At the end of 2013, about 5,000 battery systems were installed, with a capacity of 35 MWh. By 2019, a capacity of 2 GWh had already been reached, distributed across 186,000 systems. The installed capacity has increased by six times since 2019. In 2022, the number of systems increased at a slightly slower pace than total capacity. For 2023, the opposite trend can be seen, with greater growth in numbers compared to capacity.

Figure 14. Development of the total number of battery storage systems and their capacity in Germany over time

Over the past 10 years, there has been a steady increase in annual added capacity, with particularly strong growth from 2022 to 2023 (see Figure 15). The number of installed BESS increased from 186,000 systems with a total capacity of 2 GWh in 2019 to 635,000 systems with a total capacity of 6.7 GWh in 2022. In 2023, the existing storage volume experienced growth of 82%, reaching a total installed capacity of 12.3 GWh, with 1.2 million systems installed. This corresponds to an addition of 561,000 systems with 5.5 GWh of capacity in 2023 alone. Including late registrations, the added capacity in 2023 could increase to 12.6 GW across a total of 1,228,000 additional systems (see Appendix for more details). The primary factor behind this significant growth in both the number of systems and their capacity was the installation of residential BESS. In 2023, the number of newly installed residential BESS almost tripled relative to the previous year. Meanwhile, the average capacity per project has increased slightly from 8.0 kWh in 2019 to 8.9 kWh in 2023.

The annual number of commercial BESS grew significantly, increasing from 776 systems with a capacity of 37 MWh in 2019 to approximately 4,100 systems and 158 MWh in 2022. It then nearly tripled to an annual market size of almost 11,000 systems with 350 MWh in 2023. Notably, the average capacity per project de creased from 50 to 33 kWh between 2019 and 2023.

The annual mass BESS market has grown from 80 MWh in 2019 to 350 MWh in 2023 (and from 9 to 60 systems, respectively), with a particularly noticeable increase to 48 systems and a peak capacity of 470 MWh in 2022. This development has been driven by several large projects: For instance, in 2022, the largest BESS project to date, with a capacity of 117 MWh, was realized in Lingen and Werne. Additionally, in 2023, several other projects were completed in opencast mining regions such as Garzweiler (21.1 MWh) and Inden (9.6 MWh). Between 2019 and 2023, the average project capacity varied between a low average capacity of 3.3 MWh in 2021 to a peak of 9.8 MWh in 2022, and an average project capacity of 5.9 MWh in 2023.

Figure 15: Number of added battery systems and storage capacity in Germany by year of commissioning

4.2.2. Combination with PV

Combining PV systems with battery storage offers numerous advantages. Firstly, it increases self-consumption of generated solar power by storing surplus solar energy generated during the day for use during periods of low sunlight or high energy demand. In industry case studies such a combined solution has been shown to reduce the reliance on the grid and provide a reliable power source, especially when uninterrupted electricity supply is mandatory to prevent financial damages that could otherwise occur due to the chance of power outages. Additionally, PV battery systems contribute to load management and peak shaving, thereby reducing electricity costs and the burden on the grid during peak demand hours.

The integration of PV systems with battery storage systems, especially in residential areas, is becoming increasingly prevalent. 39% of all existing residential rooftop PV systems are combined with battery storage (see Figure 16). In 2019, 46% of all residential rooftop PV systems commissioned had already been paired with battery storage. This share surged to 77% in 2023, illustrating a significant upward trajectory. At the same time, PV systems increasingly incorporate BESS with combined inverters, known as hybrid inverters, which directly connect the battery storage system to the PV electricity generation via DC current. This configuration reduces efficiency losses compared to systems requiring conversion from AC to DC before charging the battery storage system. The proportion of combined PV and battery storage systems with sha red inverters relative to all systems combining PV and battery storage increased from 64% in 2019 to 90% in 2023. In total, more than 1.2 million residential rooftop PV systems have already been equipped with battery storage by the end of 2023.

Figure 16 Share of residential rooftop systems that use a battery storage system

The integration of C&I rooftop PV installations with BESS is still not very widespread. According to the MaStR database on PV installations, 6% of all existing C&I rooftop systems in place at the end of 2023 had been installed together with storage by the end of 2023. Nonetheless, their prevalence is on the increase as is evidenced by the growth in shares of newly commissioned C&I rooftop PV systems with battery storage from below 1 in 10 systems in 2019 to over 2 in 10 systems in 2022 and 2023. Interestingly, the proportion of PV systems with battery storage using a shared inverter remains below 50% and is therefore lower than in the residential sector.

In the past, large-scale ground mounted PV systems incorporating battery storage systems have been rare, although this trend may be changing. It is already evident that the proportion of ground mounted PV systems larger than 1 MW that have installed BESS has been increasing over time, from 5% in 2022 to more than 7% in 2023. It is worth noting that almost all of those PV systems were realized via innovation tenders through the Bundesnetzagen tur. Recently, the first industrial players announced plans to build all newly commissioned ground mounted PV systems in combination with BESS by default. One such project was commissioned in 2023 in Brandscheid, Rhineland Palatinate, with 7.6 MW PV pow er and 2.7 MW battery power.

Their use case differs significantly from residential or commercial applications. These BESS are often greater than 1 MW in capacity, which puts them into the category of “mass storage systems”. Unlike smaller-scale systems, they are usually not installed to increase self-consumption or bridging short-term power outages. Instead, their purpose lies in delivering control power for the power market and to store excess electricity generated by the PV system, or even from the grid during periods of high generation and low electricity prices, to feed it back into the grid during times of increased demand and higher prices. In essence, they serve as a mechanism for optimizing energy flow and maximizing economic efficiency of the combined large-scale PV and battery storage system.

In summary, there is a clear and discernible trend towards increased use of battery storage systems with PV systems. This trend reflects a strategic response to the evolving dynamics of Germany’s energy landscape, driven by the imperative to enhance grid stability, optimize energy utilization and capitalize on economic opportunities, as evidenced by recent developments and industry announcements

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Acknowledgments: We would like to take this opportunity to thank the source BSW for their presentation materials and data.