Home Solar Plus A Battery Could Be Cheaper Than The Grid In Germany In Just A Few Years

The cost of solar power plus battery storage is about to dip below the average electricity bill in Germany.

That’s the word from a new analysis by the global investment bank HSBC, which projects that the dropping price of home solar arrays combined with home battery storage is about to massively disrupt traditional fossil fuel electricity generation. According to a report by RenewEconomy, which got a look at the analysis, HSBC took a look at the situation in Germany, and concluded that power generation units with a capacity of 10 megawatts or less will make up 50 percent of the country’s power by 2025 — up from 30 percent now. “The process of re-localisation of power production appears unstoppable,” HSBC says in its paper.

“Initially we expect that this will be small-scale in the form of household-based battery storage of solar-generated power, and, further ahead, large-scale conversion of hydro-power to green gas for storage in the gas network.”

Germany has already demonstrated that the intermittency problem of renewables — the fact that the sun doesn’t always shine and the wind doesn’t always blow when electricity is needed — can largely be solved at the utility scale with better coordination on the grid. But for homes or businesses that want to generate solar power for themselves, batteries are still crucial for storing electricity to be used in the off-hours. This is where the long, slow grind of technology improvement — the process by which minor improvements in efficiency and methodology year after year, rather than sudden dramatic breakthroughs, lower a technology’s price — comes into play for both solar and batteries. Efforts like Tesla’s gigafactory to bring economies of scale to battery manufacturing are also likely to drop costs.

Add it all together, and HSBC thinks the comprehensive cost of a home solar array plus battery storage will drop beneath the equivalent cost of residential electricity in Germany before the end of the decade. “There is no prospect of any return to anywhere near the level of profitability [for fossil fuel generation] seen in the latter part of the last decade in generation,” HSBC’s analysis continued.

Now, Germany has some of the highest residential electricity prices around, so it will arguably be longer before this effect spreads to other European countries or to America. The country’s policies to promote renewables include 20-year contracts to wind and solar suppliers guaranteeing high prices and grid access. But the German public’s support for those policies remain high, to no small degree because Germans themselves locally own half of the country’s renewable generation capacity.

So arguably what’s going on in Germany is something of a pincer move: the grid itself is becoming more renewable and more localized, while at the same time more and more households are ditching the grid entirely for distributed solar.

That said, Germany’s own residential prices may soon drop. As those renewables contracts expire, the significantly lower electricity prices in the whole sale power market — where big producers and distributors buy and sell power before passing it along to consumers — should make their way into residential costs.

But the fact remains that the costs of battery technology and solar power are headed nowhere but down. Another recent and very similar analysis by the investment bank UBS projected that by 2020, small-scale solar-plus-storage power generation will become economic enough for individual homeowners in Europe that there simply won’t be any market incentive for building more fossil fuel power plants on the Continent.

Here in America, Tesla thinks the costs of battery storage could fall to $100 per kilowatt-hour by the end of the decade. As John Aziz pointed out at The Week, that would drop the combined cost of a home solar array and a home battery to $17,000 over the system’s 20-year lifespan — well below the $26,000 the average U.S. household currently spends on electricity from the grid.

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