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designed for growth

The sun rises behind electricity poles and wind turbines in Nauen, near Berlin, Germany. The country is aiming for a target of 80 per cent electricity generation through renewables by 2050.Ferdinand Ostrop/The Associated Press

This 10-part series looks at key potential growth areas around the world.

Contrary to what the recent Volkswagen emissions scandal would indicate, Germany generally scores well when it comes to environmental issues. And the country's recent push to phase out fossil and nuclear power and boost green energy has unlocked the need for new technologies – especially storage for renewable energy.

Germany's shift to green energy – known locally as the energy transition – poses a security-of-supply problem, as stable nuclear and fossil-fuel plants wind down and the country moves toward its target of 80 per cent electricity generation through renewables by 2050. That is because solar and wind are fluctuating technologies that provide most power on sunny and windy days.

While efficient large-scale storage systems that would save excess energy produced in peak generation times are still some way off, sales of small storage systems – particularly for solar energy – are flourishing. Analysts say such storage systems will play a key role in the country's future energy grid, creating high demand.

"The market is currently booming," said Tobias Rothacher, manager, energy storage, fuel cells, solar energy and bioenergy at Germany Trade and Invest (GTAI), the country's business development agency. "We'll have more and more renewables [in the grid], as well as 'baseload' power plants [nuclear, eventually also coal] going out of production within the next few years. There are good reasons to anticipate that power [and price] fluctuations will increase in Germany in the future with ideal long-term conditions for energy storage."

In 2014, 20 per cent of all new residential photovoltaic (PV) systems were installed with storage, compared with 60 per cent this year, said Martin Ammon, head of economics at the Bonn-based market analyst firm EuPD Research.

"In 2013, around 5,000 storage systems were installed. Last year, we had around 9,000 and this year our forecast is 15,000 to 16,000. So, it is nearly doubling every year," he said.

Sonnenbatterie GmbH, the German market leader in lithium solar storage systems, has seen strong continuous growth since its establishment in 2010, doubling its sales each year, said spokesman Mathias Bloch.

The growth in solar storage system sales can be traced back to cheaper and more efficient storage technology – prices have fallen significantly – as well as the planned end to the government subsidies that have helped solar energy boom in Germany. Germany is one of the top countries in the world when it comes to installed capacity.

Once German PV installations hit 52 gigawatts of installed capacity, those subsidies, which guarantee green energy producers an above-market price for renewable power fed into the grid, will end, meaning newly installed solar plants will not enjoy financial support and that storage will be a must. Installing a PV system without storage would no longer make sense, say analysts.

"Without using a storage system you can reach around 30 per cent self-consumption on the average PV system, putting the rest back in the grid at possibly a low price," said Mr. Ammon. "If you have a storage system, you can increase your self-consumption up to 60 to 65 per cent and save money."

While the 52 gigawatt target is still about 10 years off at the current growth rate, and falling subsidies are putting some consumers off installing solar panels, there is still a huge retrofit market for older PV systems without storage, said GTAI. Germany introduced renewable-energy subsidies in 2000 and those subsidies run for 20 years on solar installations, meaning about one million existing residential PV systems will exit the financial support scheme between 2021 and 2033, which increases the attraction of storage.

One other factor that has given the storage market a boost in the past number of years is a government support scheme for solar storage systems introduced in May, 2013, and funded by the KfW development bank.

Solar power operators can receive up to 30 per cent of the cost of PV storage for a new solar-energy system as a low-interest loan. About half of those opting to install storage systems used the scheme. While players acknowledge the scheme has had a positive impact in the market, GTAI says solar storage will continue to grow without it.

"In the future, as the system prices fall, and the value of storage increases (due to lower and lower support), we believe economics will be the main aspect fuelling demand for PV batteries," said GTAI's Mr. Rothacher.

Sonnenbatterie's Mr. Bloch says it is up to the industry to make products that can compete in the free market, too – at an attractive price.

"Most are surprised when they find out a battery costs around 5,500 euros and not the 15 to 20,000 euros they expected," said Mr. Bloch, who added the company is now introducing a more cost-effective smart battery. "It's our job in the industry to make the offers for battery storage and the use of renewable energy as attractive as possible to consumers."

Industry watchers caution that, despite the scheme's success, the government recently announced it will not be extended into 2016 – a move EuPD Research has criticized as short-sighted. Its prognosis for 2016: Growth will drop to 13 per cent. The agency had predicted that by 2018 more than 100,000 battery systems would be sold annually in Germany.

The end to the scheme doesn't seem to have put off domestic and international players from investing in the market. German utility giant RWE AG and car maker Daimler AG both announced their own forays into the market this summer. And Tesla Motors Inc. is launching its Powerwall solar storage system in Germany with Hamburg-based renewable energy partner LichtBlick SE and Japanese tech giant Panasonic Corp. These companies view Germany as a lucrative market because of the high number of solar installations, analysts say.

Sonnenbatterie, too, is "very positive," despite the changes.

"The market is not going to collapse – perhaps it will grow a little more slowly," Mr. Bloch said. "But storage has become very cost-effective and it's simply logical for people. There is no reason not to install a PV system with storage if you want to save money. That's why it will continue to grow."

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