The German language is said to have a word for everything. Dunkelflaute — sometimes translated to “dark doldrums” — refers to the times when it is neither windy nor sunny.
Dunkelflaute is a major problem for anyone relying purely on solar panels or wind turbines to power their home, business, or charge up their electric car.
The answer to this problem is batteries: big, fridge-size batteries that store energy when renewable sources are available and can discharge it when needed so homeowners can flick the lights on, run the dishwasher and stream Netflix.
The best-known is the Tesla Powerwall, which has a market-leading 30 per cent share of sales in the US, according to Frost & Sullivan, a consultancy. But the competition is getting more intense since two European groups entered the fray in the past month.
With Shell’s backing, Sonnen hopes to bring its batteries to the masses — a credible threat given it is already market leader in Germany, the largest country by unit sales for home batteries. In the US, Sonnen is also Tesla’s biggest rival with a 19 per cent market share.
Sonnen chief executive Christoph Ostermann says the Shell acquisition underscores “what everyone who isn’t dumb and blind acknowledges: renewable energy is not stoppable any more”.
He adds: “It’s already price competitive to fossil fuels. Everyone can generate power on their roof and doorstep. This is happening throughout the entire energy industry [but] not everyone is as advanced as Shell is.”
A few days after that acquisition, Siemens announced it would begin selling the Junelight Smart Battery, the first battery storage system offered by Europe’s largest industrial conglomerate for private homes.
“We think this is a sign of how exciting the battery market is,” says Frank Rijsberman, director-general of the Global Green Growth Institute, which works with governments to support sustainability.
“Solar and wind are now past the stage of being only commercially attractive,” he adds. “Solar is now cheaper than coal in many places, but the storage is still the issue. As soon as battery costs go down a little more, we see solar and wind, plus batteries, becoming a very attractive option.”
The market for residential home batteries — like the market for electric vehicles — is rather niche today, but it is growing quickly. According to research consultancy Frost & Sullivan, some 90,000 residential battery storage units were purchased in 2017 led by Germany, Australia and the US, which together comprise nearly three-quarters of the global market.
By 2025, Frost expects the market to multiply six-fold to 531,000 units, as battery costs drop and manufacturers’ ability to scale ramps up. A further catalyst should be that more countries will introduce government incentives for homeowners to switch from centralised power plants based on fossil fuels.
In terms of revenue, Frost predicts the market will grow from $711m in 2017 to $4.6bn in 2025.
In addition to developed markets, where household batteries are often a luxury for people to use sustainable energy and get off the grid, home storage batteries have the potential to gain a foothold in emerging and middle-income countries where power outages are a major problem.
“The number of countries where people have a generator in the garage is very high,” Mr Rijsberman said.
“Take India: a very large percentage of middle-income people have their own generator to deal with power failures. In Guyana, where we did a rooftop solar project last year, practically all businesses, all offices, have large diesel generators in their basements or parking lots.”
Such potential underlines why Shell has committed to spending $2bn a year to bulk up its renewable energy operations. This month it also purchased UK-based Limejump, a digital platform to help businesses manage how they generate and consume sustainable electricity.
“We are in the middle of a revolution towards a future where many electricity networks around the world are powered by renewable electricity,” says Limejump chief executive Erik Nygard.
Sonnen and Limejump both declined to say what Shell paid to acquire them. But Mr Ostermann says that in 2017 Sonnen recorded €65m in revenues, then grew by about a third last year, as volumes expanded nearly 50 per cent.
For the market to continue accelerating and expand to more markets, battery prices need to fall further.
Between 2010 and 2017, the price of one of Sonnen’s fridge-sized units dropped 80 per cent from €25,000 to €5,000. The decline has been driven by surging investments into lithium-ion batteries thanks to mobile phones and electric cars. McKinsey, the consultancy, has noted that battery prices fell “much faster than anyone expected”.
But this decline has slowed. The next wave of decreases in home battery storage prices is expected to come from two factors: a fall in electronic costs and a 5-10 per cent a year improvement from a massive scale-up in manufacturing.
Resources from Shell, Mr Ostermann hopes, will give Sonnen the ability to expand its footprint. “A global mass market — this hasn’t happened yet,” he says. “We have an opportunity to be one of the winners.”
Mr Rijsberman says what sets Sonnen and Tesla apart from the competition — such as South Korea’s LG — is the software they deploy to help homeowners manage their energy and sell any excess power to other battery users or the wider grid.
“The largest reason they are more interesting than LG or some of the other cheaper batteries is they offer intelligent power management solutions,” he says. “The software with it is smart — it offers deep integration that will power the Internet of Things. That is the future of many battery applications.”
Siemens makes the same claim for its Junelight battery, allowing customers to monitor the production, storage, consumption and excess feed-in to the grid in real time.
“This allows homeowners not only to lower their energy costs, they are also making a substantive contribution towards the success of the energy transition,” says Siemens executive Andreas Matthé.
Majors shift to the power sector
As the world shifts towards cleaner forms of energy, European majors such as Shell and France’s Total are expanding into the power sector as an outlet for their growing gas production.
Even as some oil and gas sector analysts question the ability of energy majors to generate returns from businesses outside their traditional areas of expertise, the investments have been coming steadily.
In 2016, Total bought Saft, a French battery developer for industries ranging from energy to transport and telecoms. Last year, its venture capital unit bought a stake in Ionic Materials, a privately held US battery developer. Total said it wanted to take a “closer look” at their technologies which could significantly improve battery safety, performance and cost.
BP, which has tried to focus it’s power investments in the space of mobility and electric cars, last year announced it had taken a $20m stake in Israeli ultrafast charging battery technology developer StoreDot.
Wood Mackenzie, an energy consultancy, argued late last year that an 80 per cent fall in battery costs since 2010 was making battery storage a more effective solution to the reliability problems of renewable energy. Still, further cost reductions and technology innovations are necessary to make electric vehicles a viable widespread solution to reduce local air pollution. Anjli Raval