Home batteries for everyone?
Solar panel adoption in the Netherlands has skyrocketed, with nearly one-third of homes outfitted with solar panels by the end of 2023, setting a European record. While this growth in renewable energy is a big milestone, it brings a new challenge: congestion in the electricity grid. Currently, only 30-40% of the electricity generated is consumed directly, as peak demand and peak generation rarely coincide. Net metering policies, which currently allow households to sell excess energy back to the grid at the same price for which they buy energy, provide little incentive to consume energy when it’s most needed. However, with the announced phasing out of net metering and new charges for electricity fed back into the grid, home battery systems are gaining popularity. The question that rises is: should every household with solar panels install a home battery?
Potential benefits and new challenges
A home battery allows a household to store its generated electricity and use it when needed, which can be especially useful for times when solar production is low. Often, peak moments of demand do not match peak moments in supply. However, even households without solar panels can benefit from battery storage by drawing electricity from the grid when it's cheapest and selling it back when prices are higher. In this way, home batteries could help balance electricity supply and demand.
For this to work effectively, several conditions need to be met. Dynamic pricing for electricity is a must, and batteries would need to be distributed evenly across different regions to prevent localized grid congestion. If too many households in the same area adopt batteries, we could see new bottlenecks emerge, particularly during peak demand hours. This is because these households would react to national electricity prices, but deliver energy at the local level. The tendency for environmentally friendly products like solar panels and electric vehicles to spread in clusters, often driven by neighbor influence, makes this scenario even more likely (Bollinger & Gillingham, 2012; Richter, 2013; Graziano & Gillingham, 2015; Rode & Weber, 2016; Carattini et al., 2018; Narayanan & Nair, 2013; Pettifor et al., 2017; Tebbe, 2023).
Context
Whether or not home batteries are a good solution also depends heavily on context. Factors like electricity supply arrangements, electricity pricing, and subsidies play crucial roles. For example, in regions with power outages, such as California, a home battery provides the added benefit of energy independence. Bollinger et al. (2024) highlight how solar panels and home batteries complement each other, especially in scenarios of power outages. Their research shows that 20% of households would not adopt either solar panels or storage without the availability of both together, and the demand for these bundles increases as power outages become more frequent.
What is next for the Netherlands?
In the Dutch context, there are two alternatives to widespread decentralized power storage. First, encouraging energy use during peak solar production times through dynamic pricing contracts could incentivize consumption when electricity is most abundant. For example, using a dynamic price ceiling, as proposed by Gerlagh (2023), could encourage more energy usage when electricity is abundant.
Another approach is to implement neighborhood-level, community-based battery systems. Instead of relying on individual households to install their own batteries, localized energy storage could help smooth out electricity demand and supply across entire regions. This type of collective solution might be more effective in balancing the grid and reducing congestion than individual battery systems.
While home batteries offer exciting possibilities, the future of energy storage in the Netherlands may lie in collective solutions rather than individual installations, with government coordination playing a crucial role in managing and balancing the grid effectively.
