Privately Owned Battery Storage: Re-Shaping the Utility Business Case

Serguei Netessine and Christian Kaps, Operations, Information and Decision, The Wharton School

Abstract: How can rooftop solar owners capture economic value from investing in battery technologies? Storage adds at least three strategic options for homeowners that previously could only directly consume solar generation and sell any excess instantaneously, thus they traditionally relied on feed-in tariffs or other subsidies. The first strategic option is that batteries allow to store excess electricity for later consumption (e.g. in the evening or at night), consequently lowering electricity demanded from the grid. The second strategic option is that storage enables the owner to strategically participate in the electricity market. Whether buying electricity at negative prices or discharging storage for sale at peak prices, storage moves electricity away from a consumption-only market and we want to see to which degree this is happening as storage technologies improve. As a third strategic option, storage renders other investments (e.g. e-mobility or electric water-heaters) more economical and we will try to understand how these technologies impact each others’ adoption. We want to study the changing market for utilities with a focus on electricity generation and delivery. As mentioned above, storage has the potential to drastically lower electricity demand while simultaneously increasing its market variability and sharpening price competition. We aim to descriptively study these effects and will try to quantify their extent and interaction. With such a framework at hand, we then aim to prescriptively look at strategic options for utilities going forward.