As PV markets mature, it is natural for incentive structures to evolve. This can be partially attributed to the market approaching or reaching grid parity.
Many European countries are either close to or nearly at grid parity. This has been achieved due to increasing electricity prices from the grid in combination with decreasing prices for PV components.
According to Solar Power Europe, the cost of solar electricity generation is the fastest declining energy source, while other power sources, such as coal, are increasing. But just because the incentive structures evolve does not indicate an end of the solar market. In fact, these evolving incentives can actually create new opportunities.
There are a number of different types of incentives to support the development of a PV market and each different phase. A feed-in tariff (FiT) is typically the incentive that is used to kick start a new PV market. This subsidy scheme is when a utility or other party pays renewable energy producers a fixed and above-retail rate for electricity supplied to the grid. This subsidy helps to significantly decrease the payback time of a PV system, making it financially attractive. The UK PV market ballooned under FiTs.
Typically, the next phase of PV subsidies is net metering. This is when the cost of the electric energy consumed from the grid is offset by the electric energy generated by the renewable source. By and large, the US PV market is a net metering PV market.
A more advanced PV market typically has Time of Use incentive structures. This is a more complex incentive in which the cost of electricity varies based on the time of day and week it is used. As the incentive structures progress, PV tends to become a larger portion of the energy mix.
This can cause issues, such as the duck curve, which is a graph illustrating the imbalance between PV production during the day and peak energy demand in the evening. When the duck curve becomes too deep, causing steep ramp up times in the evening, then the PV market tends to move to the next level of incentive structures: self-consumption.
This is when homeowners use batteries and smart energy in order to store energy and shift consumption in order to maximise self-consumption. Germany was a FiT market up until 2014, but is now a successful self-consumption market. While the UK PV market did not have a gradual evolution of incentives, there is still an opportunity to become a successful self-consumption market.
Since solar energy systems typically do not produce energy at the same time that the average homeowner can consume it, there are two approaches to increase self-consumption: storing energy or shifting energy consumption. In order to increase self-consumption of solar energy, homeowners can couple their PV systems with batteries and smart devices.
Solar-plus-battery systems enable homeowners to shift self-produced energy to be available during times of peak energy consumption in order to further reduce their electricity bills and increase energy independence. In many cases, adding battery storage can significantly increase PV self-consumption. Since the UK PV market already has significant experience with these solar-plus-battery systems, there are just a few key tips to keep in mind for installing these systems:
1. The battery's capacity should meet energy demands;
2. The battery’s charging and discharge rate should meet energy demands;
3. The battery should have a high-power rating;
4. The battery and inverter should have flexible installation, warranted for both indoor and outdoor installation;
5. Both the battery and inverter should have long-term warranties with wide warranty coverage;
6. A DC-coupled battery system will ensure that there is minimal energy loss and increase the amount of energy that can potentially be routed to the battery, and;
7. The inverter is just as important as the battery so make sure to select a high-quality inverter since it will manage the energy
While storing energy in a battery is one way to increase self-consumption, another method is to add smart devices that are controlled by the inverter. Shifting energy consumption by leveraging smart devices is one of the easiest and most cost-effective ways to increase self-consumption. In terms of energy usage, this allows homeowners to shift consumption to line up with PV production.
This solution best fits homeowners that have flexibility with their energy usage. The PV inverter can divert excess solar energy to loads, such as water heaters, air conditioners, pool pumps, and EV charging. As an example, water heating costs make up, on average, about 15% of the electricity bill, but this can be significantly reduced or even eliminated by directing excess PV energy produced during the day for free hot showers at night.
Using solar to charge EVs, like with SolarEdge’s EV charging solar inverter that has solar boost mode, is another excellent example, especially since EV charging is predicted to be one of the largest household loads. And with the UK’s commitment to transitioning to EVs, this market could hold a lot of growth potential for installers.
There are many PV markets that continue to thrive with self-consumption. In fact, this model can offer new opportunities for PV installers. A self-consumption PV market can allow installers to diversify their business to expand into the installation of batteries, smart energy devices, and EV charging.