Residential Energy Storage Market

Residential Energy Storage Market Size, Growth Report Forecast

[291 Pages Report] The market for residential energy storage is expected to witness significant growth, with an estimated value of USD 898 million in 2023 and a projected reach of USD 2,081 million by 2028, exhibiting a Compound Annual Growth Rate (CAGR) of 18.3%. The residential energy storage market has promising growth potential due to the rising production of electric vehicles, initiatives by government, growing R & D investment in lithium-ion batteries.

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Residential Energy Storage Market Growth Dynamics

Driver: Significant demand for electric vehicles

Key factors contributing to the growth include demands for electric vehicles and increasing virtual power plant deployment. Electric vehicles are one of the major application segments and may emerge as a driving force for wide adoptions of energy storage solutions at the residential levels . The increasing demand for electric vehicles and the expanding deployment of virtual power plants are key drivers behind the growth of the energy storage market. Electric vehicles, which serve as a significant application area, have the potential to drive the widespread adoption of energy storage solutions in residential settings . The rising utilization of electric vehicles in Europe and North America further amplifies the demand for energy storage systems in these regions.

In the grid services market, there exists an imbalance that puts solar-battery-electric vehicle (EV) systems at a disadvantage. This is a market that provides incentives for electricity generation and storage, which are crucial in balancing network demand and supply in real time. The current design of such markets is inequitable, often because of codes that increase certification costs on small energy assets to unfair levels for large conventional power plants. In contrast, electric vehicles could become a leading source of grid stability in the near future. This is because they represent a huge but yet largely untapped grid-connected energy resource. For example, in the UK particular battery providers, such as Moixa (UK) and PowerVault US, provide an annual fee to household consumers in return for access to the batteries that provide aggregated grid management services. This market offers incentives for electricity generation and storage, which play a crucial role in balancing network demand and supply in real time. However, the current structure of these markets unfairly favors large conventional power plants, often due to codes that impose high certification costs on small energy assets. In contrast, electric vehicles have the potential to become a significant source of grid stability in the future, as they represent a massive, yet largely untapped, grid-connected energy resource. To illustrate, certain battery providers like Moixa (UK) and PowerVault (US) in the UK offer household consumers an annual fee in exchange for accessing their batteries to provide aggregated grid management services.

Governments are encouraging electric vehicle owners to install energy storage batteries at home in response to the significant strain placed on the current grid infrastructure due to the increased adoption of electric vehicles. These energy storage batteries enable homeowners to charge their electric vehicles while alleviating the burden on the grid. Among the major factors affecting residential installation of energy storage batteries, especially for utilizing off-peak power for charging, is the growing sales of electric vehicles. Electric vehicles have begun to gain momentum in many countries around the world, including the US, the UK, the Netherlands, Norway, and China. This has consequently put immense emphasis on the construction of battery-based electric vehicle charging platforms, which in turn is encouraging the residential energy storage market. These energy storage batteries enable homeowners to charge their electric vehicles while alleviating the burden on the grid. The surge in electric vehicle sales is a key factor driving the installation of energy storage batteries in residential settings, particularly for utilizing off-peak power for charging purposes. Countries such as the US, the UK, the Netherlands, Norway, and China are witnessing a growing use of electric vehicles. Consequently, there is a strong emphasis on establishing battery-based charging platforms for electric vehicles, which in turn promotes the growth of the residential energy storage market.

Restraints: High initial investment

Because of the heavy capital involved, battery-powered energy storage systems have not been widely implemented yet. The capital cost includes a lot of difference group expenses like raw material, material processing, manufacturing of the system, and operation of the plant, among others. Raw materials dominate the cost of battery packs at 75% of the pack cost, while manufacturing and other costs are at 25% of the cost.

The costs for residential grid-connected solar panels integrated with lithium-ion batteries may vary in the range of USD 7,000-USD 14,000. Small-scale lead-acid batteries, costing about USD 200, are extensively in use for emergency back-up power for RVs. Although solar batteries have become relatively inexpensive in recent years, they are still seemingly quite expensive, and high cost is one of the major barriers that prevent wider diffusion among a large number of potential customers with limited budgets. Although solar qualifies for a 30% federal tax credit and a number of states provide additional incentives, all of these energy storage systems are bound to have a fairly high overall capital investment. This will restrict the wide use of an energy storage system by residential users.

Opportunities: Increasing installation of solar PV modules

The solar PV modules and energy storage can serve as very important supplies in case of an outage because they can provide backup. Their operation ensures the continuity of the most important facilities, enabling essential services like communication and the charging of devices like mobile phones, and laptops, also allowing the maintenance of summer air conditioning. Apart from this, the integration of solar and storage systems can help microgrids and small-scale applications, including portable power units, to a great extent. The demand for residential energy storage systems is accelerating based on increased demand for solar PV systems. These systems not only contribute to energy bill savings but also align with supportive government policies, guaranteeing a consistent power supply in the event of power outages.

The residential PV installations are experiencing a surge in popularity, primarily driven by favorable government policies and funding support. For example, in 2020, China held online biddings for residential solar PV projects with an installed capacity of 9 to 10 GW. The solar PV module market developed a lot in 2020, with the market double in value compared to the previous year, as installations were driven by the expectation of generous FIT schemes expiring in 2021. In Europe, residential PV installations continued to grow, with a main focus on self-consumption in Germany and net metering programs in the Netherlands and Poland.

Challenges: the Aging of lithium-ion batteries

Despite such gigantic development and enhancements, there is a big drawback associated with lithium-ion battery technology: the question of aging. With time and usage, lithium-ion cells lose their energy storage capability, leading to performance reduction. This kind of aging can easily be noticed in devices such as mobile phones and laptops, where the degradation of batteries becomes noticeable. While this degradation is visible in portable devices, it is a much more critical concern in electric vehicles. The natural aging of battery cells is under study to understand how that affects the available driving range of electric vehicles and limits their overall efficiency and usability.

Thus, aging of lithium-ion cells is an inherent characteristic due to the chemical reactions between the negative electrode and the electrolyte. The consequences depend on many factors involving usage and cell design. The conditions and practices that accelerate the aging process for the battery are long storage at full charge, high charge currents, charging in low-temperature conditions, utilization of cells at high charge current, and extreme voltage ranges during cycling. Still, there is no universal solution to ensure optimal battery life under all conditions. The challenge is only to be overcome with continued improvement of cell design and battery packaging, optimization of use profiles, and also very significant experience in the fundamental ageing mechanisms of new cell chemistries.

The goal is to continue improving battery technology to extend battery life and performance across a range of operating conditions. This necessitates a multidimensional approach involving advancements in cell design, construction techniques for battery packs, and optimizing the usage patterns to maximize the lifespan of lithium-ion cells.

By technology, the lithium-ion segment is expected to witness the highest growth rate during the forecast period.

From 2023 to 2028, the lithium-ion technology is projected to exhibit the highest growth rate compared to other battery technologies. The lithium-ion segment will show extensive growth in the forecast period and add to the development of the global market.

Based on power rating, the segment of 6 to <10 kW is likely to have the largest share in its usage during the forecast period.

The 6 to <10 kW segment is likely to continue holding the largest market share during the forecast period. This finds its major impetus in the pervasive unsteady grids and extended power outages that characterize developing nations across the Asia Pacific and Africa. Its impetus comes from the need for reliable power solutions in these regions to offset adverse effects linked to unstable electrical grids, therefore ensuring continued access to electricity.

By type of ownership, the customer-owned segment is expected to be the fastest-growing during the forecast period.

Based on ownership type, the market is segmented into customer-owned, utility-owned, and third-party-owned. Among these, the customer-owned segment is experiencing significant growth. This is due to the fact that it resolves issues on overvoltage and inequalities in energy demand and supply. Customer-owned energy storage helps residential customers to control their energy consumption and regulate their energy utilization for more efficient energy distribution within their premises.

Europe is expected to be the largest market during the forecast period.

During the forecast time frame, Europe is anticipated to be the largest and fastest-growing regional market for residential energy storage. The development of the domestic energy storage market in Europe is characterised by strategies for reducing dependency on variable electricity prices and improving the usage of self-produced green energy.

Key Market Players

The major players in the global residential energy storage market are Tesla (US), Panasonic Holdings Corporation (Japan), Sonnen GmbH (Germany), VARTA AG (Germany) and Enphase Energy (US).

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Scope of the Report

Residential Energy Storage Market Highlights

This research report categorizes the residential energy storage market by technology, power rating, connectivity type, ownership type, operation type and region.

Recent Developments

• In September 2022, BYD Company partnered with Victron Energy to find out compatibility BYD Premium LVL / LVS and Victron inverters/chargers which was successfully completed.
• In August 2022, Tesla partnered with Green Mountain Power (GMP) for the deployment of Powerwalls, Tesla’s home battery pack, in a decentralized way with electric utilities. The relatively small electric utility operating in Vermont was one of the earliest adopters of Tesla Powerwall.
• In August 2022, Huawei Digital Power and Pinggao Group Co., Ltd have signed a Memorandum of Understanding (MoU) to strengthen their cooperation in the supply of innovative and reliable Huawei string inverters for PV plants in Balkan countries such as Greece, Bulgaria, and North Macedonia.
• In February 2022, Enphase Energy announced a partnership with Swell Energy that, Enphase Energy Systems powered by IQTM Microinverters and IQTM Batteries will be able to participate in Swell's distributed, virtual power plant (VPP) programs in California, New York, and Hawaii as a result of the collaboration.

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