Enabling High Penetration PV through Tightly Integrated Behind-the-Meter PV/Storage Systems: Emerging Trends from Germany

 By Matt Kromer, Sidharth Choudhary, Christof Wittwer, Felix Braam and Robert Kohrs

A combination of the rapid growth of distributed solar photovoltaic (PV) generation in Germany, a changing regulatory regime that has limited price supports for PV generation while subsidizing battery/PV systems and falling costs of battery-based energy storage has spurred intense interest in behind-the-meter battery/PV systems as a means to cost-effectively integrate solar PV into the German power distribution system. While these systems are not yet economical, multiple converging technology trends – in particular, continued storage system cost reduction, improved systems integration, and development of an integrated, interoperable control framework – offer the potential for broad-based adoption over a five-year time horizon. These emerging trends within the German PV market offer insight as to how the less mature U.S. market might evolve.

As of 2014, the total installed capacity of solar photovoltaic (PV) in Germany was 38.5 gigawatts, roughly 20 percent of the total power generation capacity and 6-7 percent of the electricity generated in Germany. This high degree of PV penetration has been enabled primarily both by the regulatory framework – specifically, a feed-in tariff (FiT) mechanism that provided a preferential energy rate for solar generation – and technical innovation, which has enabled a 75-percent reduction in the installed cost of residential-scale (<10kW) PV Systems since 2006 to less than $2.00/watt on average. These high penetration levels of solar within Germany have exerted significant market pull for the wide-scale deployment of energy storage. In particular, because the installed base of PV in Germany is dominated by small, distributed systems, there is a strong driver specifically for integrated behind-the-meter PV-battery storage systems.

From a grid-operations perspective, co-locating storage with distributed generation allows the grid operator the flexibility to mitigate both global (e.g., matching supply to demand) and local (e.g., minimizing backfeed, optimizing Volt/VAr, and limiting congestion and line losses on the transmission and distribution [T&D] system) impacts of high renewable penetration.

From a regulatory and market perspective, declining FiT incentives (0.40 Euro/kilowatt-hour in 2010 to its present value of 0.13 Euro/kWh) strongly encourages self-consumption over feeding-in to the grid for domestic PV installations, given an average electricity price of ~ 0.30 Euro/ kWh. Coupled with subsidies for on-grid photovoltaic-battery systems, there is a significant financial incentive to deploy integrated PV-battery storage systems.

Behind-the-meter storage also offers additional hedonic and economic benefits due to, e.g., potential to island, and potential to participate in transactive energy markets.

Even in light of these emerging trends, however, the market for integrated battery/PV systems is not yet mature. For example, the installed cost of small (kW-scale) Lithium-ion storage systems is currently upwards of $1,000/kWh for Li-ion systems, and commercially available systems tend not to offer the combination of efficiency, reliability, integration, and access to value streams that could spur adoption. However, meeting these requirements appears eminently feasible. From the point of view of hardware, costs are widely expected to decline by a factor of two (or more) within a five-year timeframe. This trend will be driven both by declining unit cost of storage technology (e.g., through increasing production volumes and evolutionary technical innovation), and through improved systems integration with PV systems, leveraging efficiencies due to shared hardware and installation.

Beyond reduction to the $/kWh of storage technology itself, significant opportunities exist to improve the viability of behind-the-meter PV/battery storage systems through the development and deployment of integrated control platforms that utilize the aggregated capabilities of PV, loads, and storage, while accessing exogenous variables such as markets, control inputs, and forecasts to support configurable optimization objectives. This class of technology has the potential to both decrease system cost while increasing the value-add of storage. For example, leveraging behind-the-meter loads as a form of virtual storage offers the opportunity to downsize the battery capacity required (or alternatively, limit the cycling of the battery) to effectively match local generation to demand.

In a similar vein, such an integrated control platform can leverage an intelligent optimization framework that integrates factors such as solar production, local demand, net metering caps, energy prices, and weather forecasts can yield an economic benefit for the user. For example, the Fraunhofer Institute for Solar Energy (ISE) has developed a novel forecast-based control scheme that, based on PV production, load forecasts and regulatory requirements, charges or discharges the battery without compromising its ability to mitigate PV peak power production on any given day. The control framework has been implemented on the OpenMUC control platform, an open-source, manufacturer and hardware-independent framework developed by ISE to enable rapid and open integration of a broad portfolio of devices using standard communication protocols. In comparison to the typical “own-consumption optimization” model that currently dominates the market, It has been shown to provide annual benefits of up to 100 euros.

In the context of the U.S. market, several issues are worth highlighting as one looks forward.

First, the technology is, to a certain extent, fungible between markets – i.e., the same forces that will drive down the cost of integrated PV/storage systems in Germany will do so in the U.S.

Second, although the U.S. tends to rely primarily on a combination of regional net-metering and renewable portfolio standards (as distinguished from the German FiT framework) – as PV penetration levels rise, there is likely to be a similar market pull to incentivize some combination of self-consumption and/or dispatchability of DG – and hence energy storage.

Third, relative to Germany, the installed PV capacity is comparatively biased towards larger utility-scale systems – which suggest that on the margin, there is less of a pull for behind-the-meter solutions. Finally, it should be noted that the U.S. has a highly Balkanized regulatory regime (50 states) and power distribution system (>3,000 distribution utilities). This has important implications with regard to the need for highly configurable control platforms that can adjust to varying markets, incentives, control signals, and regulatory requirements, and the development of a standardized interoperability framework for communicating these requirements.

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