Residential Battery Storage—Reshaping the Way We Do Electricity

In this study, we investigate households’ investments in behind-the-meter battery storage alongside rooftop solar and examine the effects of these batteries on consumers, the power market, and environmental emissions. We develop a structural estimation model of residential electricity usage that separates observed demand and consumption preferences and lets us estimate a nonfinancial utility that households may have for using self-generated solar power over grid-procured electricity. We call this utility 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 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 CO 2 /year/kWh of battery capacity. However, 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 storage is optimal for 54% of households, which would reduce the residential grid load by 38%, but, counterintuitively, also make it more variable.