Government Incentives in Germany- How Crucial are they to Increasing Energy Storage Deployments?

As the battery storage market conquers the world, Germany is one of the top countries for using renewable energy resources for energy storage solutions. Industry reports that the installed battery capacity of residential battery energy storage has increased 52% over the year to 1.2GW/1.9GWh in 2022. Meanwhile, the installed capacity of front-of-the-meter large-scale energy storage has increased by 910% to 0.43GW/0.47GWh. 

According to 2022 reports, Germany became the leading country in Europe's residential energy storage market by reaching the 7.0GWh installed capacity of residential battery energy storage systems.

Government incentive policies play a crucial role in this most significant achievement. In this article, we'll analyze government incentives in Germany and learn how vital they are to increasing energy storage deployment. 

Current Status of Energy Storage in Germany

Germany's growth in energy storage technologies worldwide is unmatched. Honestly, large-scale storage solutions might not be necessary for decades to come, but small-scale technology, in the form of batteries in both vehicles and homes, is showing a larger impact on power grids and utilities, and Germany is supplying the crucial raw material. Whether it's the use of wind or solar, Germany may replace the whole use of coal. 

In 2023, Germany added nearly 4GW/6.1GWh of energy storage installation capacity, an unforgettable 124% and 116% year-on-year increase. 

Currently, behind-the-meter (BTM) is the main application scenario for energy storage in the country, and multiple policies back it. The German Federal Ministry of Economic Affairs and Climate Action declared its "Easter Package" in March 2022, which made a number of changes to Energy laws and made the latest long-term and medium goals for renewable energy developments. These developments include the fact that by 2030, 80% of Germany's power supply will depend on renewable energy.

Types of Government Incentives in Germany

Here, we roughly categorize Government incentives into two categories: financial incentives and regulatory incentives.

1.Financial Incentives

• Tax incentives for energy storage investment

On April 1, 2002, Germany first issued the Renewable Energy Act. According to this act, the federal government charges an extra tax on electricity bills for the development of renewable energy, called an EEG surcharge. This act was rejected in July 2022 in the form of an instant increase in energy prices to lower the burden on households and businesses.

Furthermore, the 2022 Annual Tax Law excluded value-added tax (VAT) and income tax from energy production income for residential energy storage systems.

• Direct Subsidies for Energy Storage System

2013, the German government declared it would offer direct subsidies for battery storage systems. These subsidies would be 30% of the total system cost and connected to the latest distributed solar systems of less than 30KW. This policy was extended to 2018. Currently, financial subsidies remain from local governments in accordance with federal government guidance.

• Offer Low-Interest Loans for Businesses and Residential Projects 

KfW provides grants and low interest for businesses, residential projects, and other public institutions to build, develop, and buy renewable energy systems and renewable energy storage systems. They offer the highest €500,000 loan per project and, in 2023, the new annual percentage rate of 4.75%.

• Innovation Auction for Incentivise Deployments

The German Federal Network Agency introduced its Innovation Auction for the very first time in 2020 to incentivize the deployment of renewable energy projects. This strategy tremendously drove the growth of renewable energy installations in the country.

Further, the 7th amendment to Renewable Energy Law concluded that the Innovation Concept Auction of green hydrogen-based energy production and P2G hydrogen storage, with project auction aiming to hit 1,000 MW in 2028 and more than 400 MW in 2023. 

2.Regulatory Incentives

The German parliament has accepted the amendments to the law that offer energy storage as its legal definition. Amendments have been made to the Law on Energy Industry Act, Federal Requirements Plan, and Grid Acceleration Act, which now declare energy storage an asset where the final deployment of electricity energy is delayed to a later point in time when it was produced. And this act was the beginning of more storage-friendly regulations. 

Low Prices of Batteries: The Solar Battery Boom in Germany

The leading cause of the present battery trend is an instant price decline in lithium-ion batteries due to their higher demand in consumer electronics and increasingly in electric vehicles. 

Within five years, battery prices have dropped by more than half in Germany, and there is no end in sight for further reductions. Forecasts business suggests that the total cost of an energy storage system should decline to 50-70% by 2035 due to design module advances and streamlined processes. Such strategies make energy storage solutions accessible to every individual.

Even private households have already begun to embrace the technology. About half of all residential solar PV systems are now set up in conjunction with a battery. 

Challenges and Limitations of Government Incentives

It’s already easy to operate energy storage systems in Germany due to the privileges of energy storage systems. But there are still some challenges that can be hurdle to shift towards renewable energy sources totally;

• Individual points regarding the clean construction of energy storage systems concern various specialists, legal areas, and authorities’ approval. This can delay approvals and planning for private household projects. 

• Further, any economic disaster can limit the granting of funds and loans, which can also make it difficult to set up large-scale energy storage systems. 

Germany's Alliance with Other States for Home Energy Storage Solutions

Germany is developing its states to more sustainable energy storage solutions and is forming alliances with other countries, like Ireland, to present Avant-grade home energy storage systems.

In this regard, a leading BESS company, Innotinum, plays a key role. They are accommodating their ground-breaking and eco-friendly products within the reach of the Irish community. For this mission, Innotinum collaborated with Electric Paddy.

Bottom Line

In short, along with the fluctuations in energy prices, the German government launched various policies and regulations to boost solar batteries, particularly in residential projects. These are essential applications in the country's energy storage solutions.

Multiple companies like Innotinum help the consumer avail of government incentives and offer their energy storage solutions at affordable prices. They offer more sustainable solutions like lithium-ion batteries that not only help transform solar energy into electricity but also help store it for lower grid dependency and later use.