How Is The European Energy Storage Market Influenced By Disruptive Business Models?

New value propositions which will radically change the way energy is generated and used by end-customers are already accelerating energy storage market growth.

While in the grid-scale segment, many are waiting for regulation to enable certain approaches to storage, much is happening in the distributed energy storage sector. In our recent report on business models for distributed energy storage, we identified three primary approaches to sharing value between the end-customer and energy system. In this article, I will be focusing on the first two, which we believe have the greatest short-term potential:

  1. ‘Shared Benefit’ – Business models that provide customers with an additional upside. Commonly through aggregating behind-the-meter battery storage capacity to provide ancillary and demand response services.
  2. ‘Storage for free’ – New financing models to overcome the upfront cost barrier. As part of reducing the upfront costs, the storage assets aim to provide values for both customers and tap into e.g. ancillary or capacity markets.
  3. ‘Community Storage’ – Utility side of the meter assets integrating an offering for a larger part of the value chain – DNOs, energy suppliers, customers and generators.

Looking across markets in Europe and globally, we see many different stakeholders innovating and it’s crucial to understand what propositions are shaping the market today – or risk being left behind.


A ‘flat rate’ for electricity – too good to be true?

In terms of ‘shared benefit’ models we see fast growth across European market, whether it is Fenecon or Senec.IES in Germany, Eneco in the Netherlands or Moixa in the UK, just to name a few. Interestingly, last month one of the market leaders for residential energy storage, Sonnen, announced the introduction of the sonnenFlat, which – surprise – is basically a ‘flat rate’ for electricity.


Can ‘storage for free’ models be successful in a European context?

When saying ‘for free’, we really mean a no upfront cost solution. This is strongly emerging for commercial customers in the ever-prevalent Californian market. Companies such as Stem or Green Charge Networks (aka Green Charge) are effectively using the market-specific energy price structure, local demand response programmes, intelligent software, as well as clever financing mechanisms. Ultimately, ensuring energy cost savings from day one without the upfront investment is a no-brainer in the commercial sector. In Europe, similar developments are much further away from being implemented in the market. As the industrial & commercial segment is slowly starting to develop especially in the UK, we do expect initial propositions – but for now the market specific drivers remain too weak to make the model bankable.


Building a successful customer proposition

After analysing a wide range of examples, we wanted to understand what factors are really influencing the potential success of these business models. Importantly companies need to have the ability to access value from flexibility and power trading or build effective partnerships with those players along the value chain who can. Secondly, smart software and data are at the heart of driving innovation and will become much more important than the storage system hardware. We also see that the ability to secure financing to achieve scale and finance projects differentiates the market leaders. Lastly it’s about ‘daring to trial’ – i.e. not waiting until energy storage costs come down, but instead implementing innovation and learning from it.


‘Shared value’ propositions will drive the European market in the short-term

Until 2020, we see ‘shared benefit’ models driving the market for residential and small commercial energy storage – with up to 150,000 customers taking advantage of such propositions. At the same time ‘storage for free’ propositions will slowly emerge both in the residential and C&I segment. However, as drivers are significantly weaker, we expect slower deployment speed in the short-term.


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