European Market Outlook For Residential Battery Storage 2021–2025

Foreword Welcome to our European Market Outlook for Residential Battery Storage 2021-2025.
Solar & battery storage is probably the greatest couple in the energy transition – they truly bring out the best in each other. While solar shows larger versatility and increasingly lower cost than any other power generation technology, battery energy storage systems (BESS) are important partners to extend the reach of solar into periods when the sun doesn’t shine or just simply to make the energy system more flexible. This affection is true for all PV power applications – large-scale and distributed solar. BESS is only growing more attractive for solar, as the steep learning curve of batteries has resulted in cost levels which make this duo’s economics more and more interesting to PV power generators, in particular in the residential segment, which is the scope of this report. Indeed, the growth numbers speak for themselves. In 2020, around 140,000 household battery systems with a combined storage capacity over 1 GWh were installed in Europe, which contains two landmark numbers – for the first time, over 100,000 systems were added in one year, and for the first time, the annual GWh-scale was reached. The total residential battery storage market grew by 54% to over 3 GWh of installed capacity by the end of 2020. However, the bulk demand for residential batteries in Europe was shouldered only by a handful of countries.
Germany alone was responsible for 70% of newly installed storage capacity, and the share of the Top 5 markets together (Germany, Italy, UK, Austria, Switzerland) reached 93% in 2020; that’s even higher than the year before. Our 5-year market outlook sees the same dynamic in the future – the identical Top 5 will hold an 88% share, even while the market volume is expected to grow over fourfold to 12.8 GWh in 2025.

Introduction In 2020, while Europe experienced the effects of a severe health crisis and harsh lockdown measures were enforced in several member states, households looked with increased interest at residential solar & storage solutions as a means to lower carbon footprint, reduce electricity bills and increase energy independency. Kick-started with incentive schemes, the rapid and continuing decrease of costs and prices for solar PV systems and, in recent years, Battery Energy Storage Systems (BESS), have made these two technologies increasingly attractive to homeowners.

The spread between increasing retail power prices, on the one hand, and solar & storage power prices, on the other, is widening, making the promise of solar & storage more appealing even though national support schemes for pure residential solar systems in Europe are tendentially being phased out. While power from solar rooftop systems has already been much cheaper than retail electricity in most European markets for several years, now battery storage’s rapid cost improvements is also now enabling solar & storage to beat grid power in an increasing number of European countries. In Germany, best-in-class solar & storage systems reached Levelised Cost of Electricity (LCOEs) of 12.2 Euro cents/kWh last year, which is nearly a third of the typical electricity price, one of the starkest differences in European electricity costs (see Fig. 1.2).

Residential solar and storage markets in Europe today Our first edition of the European Market Outlook For Residential Battery Storage, which was launched last year, depicted a rapidly growing home storage market across the continent. In 2019, Europe installed 747 MWh of new residential storage capacity, a 58% annual increase from the 471 MWh added the previous year. The strong growth path continued in 2020, with a 44% year-on-year increase in annual installed capacity. For the first time, the European residential battery market reached the landmark GWh scale, totalling 1,072 MWh of storage capacity installed (Figure 2.1). This is equivalent to about 140,000 battery systems installed in 2020 compared to the 99,000 installed in 2019. In other words, not only the GWh milestone was reached – also, for the first time, more than 100,000 battery units were installed in one single year.

This steep growth trajectory is even more impressive looking back at the market just a few years back, when the residential solar PV market was struggling to gain pace and poor investment conditions made solar & storage attractive to a limited number of customers. In 2015, only five years before these milestones were reached, less than 18,000 home battery systems had been installed, totalling 119 MWh. The market has grown eightfold since then.

Residential solar and storage markets in Europe tomorrow The residential BESS market will continue its strong growth over the next years. After last year’s sustained growth despite the COVID-19 pandemic, and against more pessimistic initial expectations, we expect the European residential BESS market to maintain its upward path, as many European countries see the first tangible results of the recovery packages and other measures put in place to back their economies. After the European residential battery market surpassed the GWh level for the first time in 2020, with 1.1 GWh of storage capacity installed resulting in a 44% growth, our Medium Scenario expects 1.37 GWh to be installed in 2021, up 28% from 2020 levels (Figure 3.1). We revised upwards our growth projections compared to last year’s analysis, primarily due to the improved market conditions in the two leading markets, Germany and Italy. In our previous market outlook’s most-likely Medium Scenario, we had expected to reach the GWh milestone only in 2022. Similarly, the 1.37 GWh volume we now anticipate for 2021 is higher than last year’s Medium Scenario projection for 2024. Following a steep two-digit growth trajectory, our revised Medium Scenario forecasts 1.67 GWh in 2022, 1.96 GWh in 2023, 2.21 GWh in 2024 and 2.51 GWh in 2025.

The TOP 4 EU residential battery storage markets In 2020, the four largest European residential battery storage markets – Germany, Italy, the UK and Austria – together installed 965 MWh of residential storage capacity. That is 90% of the total 1,072 MWh that was installed in that year in Europe. By 2025, we do expect annual capacity to grow significantly, but the main players will not change. The current top 4 markets will remain the largest contributors of storage installations in Europe, although their aggregate annual capacity share, which amounts to 2,208 MWh, will marginally decrease to 88% of the total 2,512 MWh we anticipate for that year (Figure 4.1).

Austria The residential battery storage market in Austria started to get traction as early as 2015, and was accelerated by an investment grant to kick-start the technology launched in 2018 at the federal level. Overall, about 24,000 units have been installed so far across the country, with a total capacity of 161 MWh by the end of 2020. Last year, 41 MWh from 6,000 units of residential storage capacity were added, corresponding to a 10% increase compared to 2019. The renewal of the investment grant by the federal government for the period 2020-2023 has been an important support element for storage to ensure a solid recovery in the aftermath of the health crisis, which caused a slowdown in the installation of home batteries. Our Medium Scenario for 2021 forecasts residential storage capacity additions of 56 MWh, corresponding to a strong 37% annual growth rate. We expect sustained growth at least until 2023, as long as the investment grant for storage is available.

The strong growth path of residential battery energy storage systems (BESS) across Europe continued in 2020 with a 44% year-on-year increase in annual installed capacity. In spite of the COVID-19 health crisis, for the first time the European BESS market reached the landmark GWh scale, totalling 1,072 MWh of storage capacity installed in a single year. With about 140,000 battery systems installed in 2020, this was also the first time in which more than 100,000 battery units were installed in a year. While the increase in the annual BESS market has been very steep, the growth in cumulative installed storage capacity is even more pronounced. The residential BESS fleet jumped from less than 2 GWh in 2019 to over 3 GWh in 2020, with a 54% year-on-year increase. Total storage capacity has grown 14 times its size, compared to just five years ago.


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