Energy Storage Systems: “The shakeout will be quick and harsh”

Expert Interview – December 21, 2023

Franz-Josef Feilmeier, Founder and Managing Director FENECON

The ees Europe exhibition will be celebrating its tenth anniversary in 2024. Franz Feilmeier has known the exhibition since the beginning. The founder and Managing Director of FENECON from Deggendorf, Germany, believes that the booming storage market will soon face a tough consolidation phase during which German suppliers will benefit from innovative energy management.

Just this past November, management consultancy Ernst & Young named Feilmeier Entrepreneur Of The Year 2023 in the Sustainability category. Feilmeier also received their Audience Award.

Mr. Feilmeier, you were an exhibitor at the very first ees Europe in 2014. What does this exhibition mean to you and to FENECON’s success story?

Before 2014, the pioneers of electricity storage systems exhibited at Intersolar. But there were also other exhibitions that tried to cover this topic. The creation of ees and its dedicated focus on storage, and later EM-Power for energy management, enabled storage systems and EMS to be seen as more than just accessories for PV installations – but to be recognized for their multifunctional value. For FENECON, ees is the most important exhibition of the year.

It is the main event for presenting new products and solutions and for meeting with our wholesale and EPC customers. The various ees AWARDs that we’ve received have been a great recognition of our innovations. I think it’s fair to say that you’ve helped us make our financial breakthrough.

Do you have any anecdotes from those days?

I’m afraid to say that in the beginning, electricity storage systems were ugly gray boxes. Back then, central inverters were more common and there weren’t as many storage systems on the market. ees was only a small sub-exhibition of Intersolar. Having been asked several times what we were exhibiting, or if it was an inverter, we learned to write “electricity storage system” in big letters on our products. Today, the differences between kilowatts, kilowatt peaks and kilowatt hours may be still be a challenge to some.

But back then, customers sometimes wondered how many kilowatts our battery had and how long it could store and provide electricity, which led to many interesting conversations. If you had a system that was designed to provide electricity for one hour, you were often dismissed and told that the lead-acid storage systems, which were common back then, could even provide electricity for five hours.

What’s your take on the recent developments in the residential storage market?

In the last couple of years, this booming market has attracted many newcomers. Now that the ability to supply electricity is no longer a selling point in itself, many market players are struggling because the focus is shifting towards service, education, proximity to customers, long-term investment security and smart energy management. As a result, the market is about to be hit by a consolidation wave.

In Europe, we’re just seeing the tip of the iceberg. But in China, low prices are upending the market and making companies and investors fail – a lot of economic capital is being lost.

How long will this consolidation wave last?

We believe that the shakeout will be quick and harsh, because many newcomers have little or no reserves that would allow them to weather such a storm. Companies originating from other industries with a focus on other products will likely give up on storage systems. We’re expecting that by the second half of 2024, only a small fraction of manufacturers will still be around.

The strategy for surviving until then: Storage systems need to be your primary product and your primanry market. If residential storage systems are a manufacturer’s secondary product, or if they’re a market with no clear focus and no strong local presence in the German-speaking countries, it is likely that you won’t survive the tough competition.

How will the commercial storage market benefit from this development?

If the many small manufacturers had had lasting success in the residential storage market, they would probably have flooded the commercial storage market with similar methods. But as things stand, there are no relevant new suppliers in the market. This segment is clearly dominated by several medium-sized German companies, where demand and supply are not drifting apart as they are for residential storage systems.

Battery production costs have gone down, enabling very profitable projects. The charging and discharging performance of systems plays a major role – for instance for peak shaving or as an alternative to grid expansion. The cost per kilowatt is just as relevant at the cost per kilowatt hour.

What makes the commercial market different from the residential market – and what does that mean?

In the market for residential storage, systems are evolving and becoming more customizable – we call this the “energy journey” of storage systems. Systems now integrate heat and mobility, as well as dynamic electricity tariffs. In our experience, users often upgrade their PV installations and battery capacity as their consumption grows. This has always been the case with commercial storage systems, where it would be unthinkable to leave a storage system and the energy management system unaltered for 20 years.

Charging electric fleets and dynamic electricity tariffs are already common in the commercial market, not least because they reduce peak loads and prevent the need for grid expansion. For manufacturers to be successful, they have to be able to transform their storage systems along with their energy management system. And this compels manufacturers to not supply cheap systems that only work at the time of purchase. Instead, they have to offer – or develop – solutions that cover the system’s entire service life and adapt to changing customer requirements.

What electricity buffer applications are providing new inspiration and trends in Germany?

It is precisely these tailor-made systems that offer optimum performance, capacity and, above all, combinations of applications that give Germany a competitive edge. China, on the other hand, prefers to supply as many customers as possible with a single mass-produced product. With smart energy management systems taking on a key role in the future energy market, smart electricity storage systems will have great potential.

Challenges such as the rollout of smart meters and dynamic electricity tariffs, controllable consumers according to Section 14a of the German Energy Industry Act and the increasing curtailments through distribution grid operators and bi-directional charging of electric vehicles are drawing near. And in this area, the area of energy management systems, we’re the global leader. A case in point is OpenEMS, which has become the leading energy management platform – in part because it involved thousands of developers.

This leads to innovative solutions, such as the forward-looking integration of dynamic electricity tariffs.

Niels-Hendrik Petersen conducted this interview on behalf of ees Europe.

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