Residential Battery Storage - Reshaping the Way We Do Electricity

In this paper, we aim to understand when private households invest in behind-the-meter battery storage next to rooftop solar and how those batteries impact households, the electricity market, and emissions. We answer three main research questions: 1) When do customers combine solar power with batteries and how large will storage adoption become in the future; 2) How does residential storage change consumer autonomy and the grid provider business model; 3) What effects do solar and storage have on carbon emissions. We develop a structural estimation model of residential electricity usage that allows us to disentangle demand and consumption preferences throughout the day, and lets us estimate a non-financial utility that households may have for using self-generated solar power over grid-procured electricity. We call this utility a nonmarket valuation, provide evidence that it is driven by sustainability and autarky desires, and relate it to the early adoption of residential storage. Applying this model to a large, proprietary, novel data set of German households, we find that the median household has a nonmarket valuation of 0.29€ per kilowatt hour (kWh). We then show that owning storage increases a household's electricity demand (storage rebound) and marginally increases the emissions by 57 kg CO2 / kWh / year of battery capacity, but we show that batteries may reduce emissions if solar penetration in the grid is sufficiently high. Lastly, we estimate that at future technology costs, 2023 European electricity prices, and without subsidies, investing in some amount of storage is optimal for 54% of households, even without any additional nonmarket valuation. This level of adoption would reduce household power purchases by 38%, but counterintuitively would also make the grid load more variable throughout the year.