Profit model assumptions for terminal household savings products
In the economic analysis of household savings, the first three products targeted are photovoltaic, energy storage, and integrated photovoltaic and storage machines.
There are two sources of income from photovoltaics and energy storage: power generation or discharge is used to save electricity bills, and excess electricity is sold to the power grid to earn electricity bills.
- Household electricity bills are higher than feed-in electricity bills, so the most economical way for consumers to use PV/storage is to offset all electricity generation. Taking China as an example, the average electricity consumption of Chinese residents in 2020 was 0.51 yuan/kWh, while the on-grid electricity price after subsidies was 0.41 yuan/kWh.
- There is a time mismatch between photovoltaic power generation and electricity load, and it is impossible to use all of it for self-use. Photovoltaic output is mainly concentrated at noon, while the peak electricity consumption on the load side is concentrated between 8-10 in the morning and 6-10 in the evening. The mismatch between power generation and electricity consumption will result in that even if the photovoltaic power generation is less than the daily electricity consumption, it may not be fully used for self-use to save electricity bills.
- Valley electricity prices generally appear in the evening to morning hours (when electricity demand is less and electricity prices are lower), the first peak discharge after energy storage charging has the greatest economic benefits, and the second charging (if there is no photovoltaic) will appear in Charge normally.
- Photovoltaic power generation and energy storage may overflow. When household electricity consumption is not high, the energy storage power is used to go online to earn electricity bills.
Figure 1: There are two main sources of revenue from photovoltaics and energy storage.
The operation model and profit model of photovoltaics, energy storage, and integrated photovoltaic and storage products
- From the perspective of independent photovoltaics, part of the photovoltaic power generation can be used for home use during the day. However, when photovoltaic power generation occurs at noon or there is less power demand in the morning, the power demand is greater than the photovoltaic power generation, so more power is supplied to the grid. Consider that if household electricity demand is small, self-consumption of photovoltaic electricity will be greater than household electricity consumption, so the excess is also used to go online to earn electricity bills.
- The independent energy storage is charged twice a day, once for normal charging and once for off-peak electricity prices. When the peak electricity consumption is greater than the discharge electricity, all the energy storage discharge is used for peak discharge, realizing peak-valley price difference arbitrage. When the discharge electricity When the peak electricity consumption is greater than the daily electricity consumption, part of the energy storage will be used for normal discharge. When the discharged electricity is greater than the domestic electricity consumption, if there is room for arbitrage (the charging electricity price is less than the grid electricity price), it can be used for grid arbitrage.
- In the integrated photovoltaic and storage machine, photovoltaic power generation is used for self-use and charging. According to the household power consumption and discharge power in (2), you can choose to discharge during peak hours, discharge during normal times, or earn electricity bills online.
Economics and sensitivity analysis of terminal household storage products
Based on calculations, European countries are the most economical, and optical-storage all-in-one products are the most economical.
From the perspective of the internal rate of return of each product, the photovoltaic storage integrated machine > photovoltaic > energy storage. If it is not equipped with photovoltaic, energy storage is basically not economical. Its income comes from peak discharge, but it needs to be charged during valley hours. The arbitrage space based solely on the peak-valley price difference is limited. Compared with photovoltaic, the photovoltaic storage integrated machine can increase the self-use rate of photovoltaic power generation through energy storage, improve the overall consumption rate, and thus have a relatively higher available power generation. Compared with energy storage, charging can come from photovoltaic power generation, reducing part of the charging cost.
Judging from the internal rates of return of various countries, Europe and the United States have higher rates of return, and optical storage integrated machines are more economical.
From the perspective of payback cycle, the payback cycle for optical storage integrated machines in the United States is 7 years, and the payback cycle for Germany, Italy, France, and the United Kingdom is 4-7 years.
Figure 2: Calculation of IRR and payback period of each country
Taking the United States as an example, it is calculated that when other conditions remain unchanged, the total cost decreases by 5% and the IRR increases by approximately 1.7pct. As the cost decrease increases, the marginal effect increases.
The benefits of the total cost reduction on the photovoltaic storage system are reflected in two aspects: one is the reduction in initial investment, and the other is the reduction in maintenance costs and battery replacement costs. The reduction in total costs can be said to be the most direct way to increase IRR and improve the economic efficiency of photovoltaic storage systems. Some US regional policies provide cash subsidies to users who purchase photovoltaic storage systems. For example, Arizona announced that within 3 years from May 1, 2018, users who purchase and install qualified battery energy storage systems and participate in the SRP battery research program can receive a subsidy of up to US$1,800. The government subsidy is actually equivalent to reducing the total cost and improving economic efficiency. From the perspective of the impact of IRR, government subsidies will greatly improve the economic efficiency of household storage systems, thereby increasing the purchasing enthusiasm of residential users.
In addition, we can see that cost reduction (other conditions remaining unchanged) has an increasing marginal effect on IRR. The cost reduction range is from 0% to 5%, the IRR is increased by 1.7pct, and the cost reduction range is from 20% to 25%. , IRR increased by 3.8pct. IRR is the discount rate at which the initial investment is equal to the present value of future cash flows, and the discount rate has a diminishing marginal effect on future cash flows. Therefore, although the amount of reduction is the same, the lower the initial investment, the greater the IRR increase.
In the future, costs will gradually decrease, the increase in IRR will become more obvious, and economics will drive the development of household savings more rapidly.
With other conditions unchanged, the electricity price increases by US$0.1/kWh, and the IRR increases by about 1pct.
The impact of electricity prices on IRR actually increases the electricity cost-saving benefits of the optical storage system. The higher the electricity price, the higher the electricity cost of consumers, and the corresponding higher benefits of the optical storage system. The effect is linear. The increase in electricity charges will increase all income by a fixed proportion, and the income structure of household savings will not change.
Figure 3: Cost and electricity price sensitivity analysis of U.S. optical storage systems
If other conditions remain unchanged, the per capita electricity consumption increases by 50kWh/month, and the IRR increases by about 0.9pct. The marginal effect will be limited by the scale of the optical storage system.
The increase in per capita electricity consumption is the replacement of domestic electricity by optical storage systems, which can be divided into two parts. One is that the original grid-connected electricity is used for domestic electricity, and the other is that the original increase in peak electricity demand will increase revenue. However, this effect will eventually be limited by the scale of the optical storage system. If the household electricity consumption reaches a certain amount, the income of the optical storage system has been maximized (peak electricity consumption is full, and normal electricity consumption is also full). At this time Increasing per capita electricity consumption will no longer improve profitability.
With other conditions unchanged, the peak-to-trough price difference increases by 5%, and the IRR increases by approximately 0.7pct.
The impact of the peak-to-valley price difference on IRR is mainly to increase the revenue of energy storage, which is specifically reflected in the reduction of charging costs during valley hours and the increase in peak discharge revenue. The effect is linear, with no structural changes.
Figure 4: The core of the development of the household savings system lies in the rate of return
The core of the development of the household storage system lies in the rate of return. According to the analysis, it can be concluded that the core influencing factors of the rate of return of the optical storage system are:
- Residential electricity prices
- Electricity peak and valley price difference
- Per capita electricity consumption
- Household savings system cost
Among them, household storage system costs and residential electricity prices are more sensitive.
