Residential Battery Storage - Reshaping The Way We Do Electricity

In this paper, we aim to understand when private households invest in rooftop solar installations and battery storage, and how these investment decisions affect their electricity usage patterns as well as the market structure overall. We answer three main research questions: 1) What drives customers to combine solar power with storage installations; 2) How does privately-owned storage change consumer autonomy and the grid provider business model, and how heterogeneous is this effect across the population; 3) What effects do subsidies have on investments, demands, and carbon emissions. We develop a structural estimation model of residential electricity usage, that allows us to estimate a household's hourly consumption preferences, and a non-financial utility the household has for using self-generated solar power over grid-procured electricity; we call this utility greenness valuation. Applying this model to a novel, proprietary, big-data-set of German households, we find the median household to have a greenness valuation of 0.29€ per kilowatt-hour(kWh). We furthermore find this sustainability-related valuation in the population follows an exponential distribution and helps explain the early adoption of behind-the-meter batteries. We then show that, in the future, at electricity prices of 38 cents/kWh, a rate seen in Europe in 2022, investing in solar and some amount of storage is optimal for 72% of households, even without any greenness valuation - this would reduce the energy purchased from the grid provider by over a quarter. Lastly, we quantify the amount of carbon saved per dollar spent of subsidies for the households observed in the data-set to be 674€ per metric ton. We show how storage subsidies' additionality depends on technology prices and a household's greenness valuation, while solar subsidies are not needed to incentivize broad adoption at current electricity prices.