Residential Battery Storage—Reshaping the Way We Do Electricity

Household investments in renewable energy technologies like rooftop solar and battery storage can be driven by motivations beyond mere financial returns. In “Residential Battery Storage— Reshaping the Way We Do Electricity,” Christian Kaps and Serguei Netessine develop a structural estimation model that separates observed electricity demand from underlying consumption preferences, enabling the estimation of a nonfinancial utility that households derive from using more self-generated solar power rather than grid-procured electricity. The authors call this utility nonmarket valuation; provide evidence that it is driven by sustainability and autarky desires; and link it to the early adoption of residential storage. Applying their model to a novel data set of German households with solar and storage installations, they find that the median household has a nonmarket valuation of 0.29 euros per kilowatt-hour. Additionally, the authors demonstrate that residential storage can have unexpected effects. They show a “rebound effect,” whereby households with storage increase their overall electricity consumption by 4%. Counterintuitively, under Germany’s observed grid mix, residential storage on average increases carbon emissions. However, they also find that demand from the grid decreases by 38% for the average household equipped with solar and storage.