Ikea leaps into solar-plus-storage, in UK battery deal with LG Chem

In a sign that solar-plus-storage is about to go mainstream, Ikea has launched a combo offering in the UK that combines batteries from LG Chem with solar panels from Solarcentury. With a headline claim of a 70% energy bill saving, it’s a boon for smart grid advocates, but perhaps a concern for the smaller and more bespoke solar-plus-storage providers, who might now feel the squeeze from the mighty Ikea.

The figures sound like a strong draw for consumers, starting at £3,000 for those who have already installed solar panels. The cheapest solar-plus-storage combo is £5,000. Ikea says that on an installation costing £7,000, a homeowner would pay off the capital investment in around 12-years – at a 6% annual return, apparently.

The Swedish giant is claiming that adding storage allows a home to use around 80% of the solar electricity it produces, rather than the storage-less version that can only use 40%. In the storage-less model, the electricity is sold back to National Grid at a loss (compared to the cost of buying it from the utility).

In the Ikea model, where the average household electricity bill is £584 per year, the homes that install only solar panels will save £380 in their first year (on that 40% usage), with homes using solar-plus-storage and the 80% utilization saving £560 per year – very near the total average bill, hence the claimed 6% return.

Tesla is poised to be rather disruptive in this formative market, with its Powerwall home batteries and now its Solar Roof offering – a solar-plus-storage system that uses panels that look just like roof tiles, piping electricity into a Powerwall. While initially expensive, Tesla’s offering also makes the claim that the system is a value-add for consumers, who will get more out of their investment than they put in.

The gist is that the upfront investment pays for itself, by slashing the cost of the household’s electricity bills. For most homeowners, a 12-year scheme is palatable, especially as solar panels usually increase the value of a home (helping cover the cost if they had to move to a new house unexpectedly). After 12-years, a home should start reaping the rewards, by way of the lack of an electricity bill – assuming Ikea’s model is correct.

Ikea’s current pricing scheme estimates focus around the 15% Ikea Family discount, a south-facing London property that is 10% shaded, a family only home in the afternoon through the week using 3,300 kWh of electricity, a 12-panel system, and a 6.5 kWh battery.

The pricing covers an £8,750 total installed cost (more than the £7,000 mentioned above), a £0.0407 generation tariff rising at 2.5% each year, an export tariff of £0.00503 export tariff, again rising in line with RPI at 2.5% annually, and a per-kWh price for electricity of £0.16, rising at 5% per year.

Notably, the model accounts for rising electricity costs, generally rising in line with inflation. While utilities are certainly diversifying their generation and purchasing portfolios, to help bridge against future uncertainty in non-renewable electricity pricing, and embrace the plummeting costs of renewable generation, it does seem unlikely that they per-unit costs they currently charge their customers are going to fall. Utilities and distribution companies will note that this is justified, given the capex and opex costs of keeping national grids online.

The Ikea model seems to cover the bases, and unless the utility market undergoes some serious business ethos evolutions, it should ring true for the next couple of decades. In a longer-term view, utilities might move away from national generation and distribution architectures, and embrace smaller grids with self-contained solar-plus-storage – serving streets or villages, rather than districts or countries.

That evolution is fairly radical by today’s standards, but it is perfectly feasible that national grids linking all end-points in a country indirectly could disappear – replaced by regional or hyper-local grids, much smaller in scale. Redundancy is the biggest argument for sticking with national networks, but these networks might eventually be viewed as an unwelcome expense for the operator.

However, less electricity is wasted when it is transferred at the kinds of high voltages generated by massive power plants – something that solar doesn’t achieve. Revolutionary technology like Nuclear Fusion could completely negate the need for distributed renewable energy, or even the advent of smaller nuclear plants using fuels like Thorium, and would require today’s high-voltage distribution networks.

But in the meantime, solar-plus-storage looks like a tempting proposition for consumers, especially if they have an environmentally-conscious disposition – another marketing vehicle for vendors and installers, when combined with the promise of potential savings.

“At Ikea we’re always looking for ways to help customers take positive actions at home for both the environment and their wallets.  We know that our customers want to live more sustainably and together with Solarcentury we will help them to get more value from their solar panels and do just that. With energy bills already going up 15% this year, there’s never been a better time for customers to take back control of their electricity bills and maximize their savings by switching to solar and solar storage,” said Hege Saebjornsen, Country Sustainability Manager, Ikea UK.

Susannah Wood, Solarcentury’s Head of Residential Solar, said “we’re committed to helping homeowners reap the benefits of going solar and our business partnership with Ikea is a significant step forwards for the renewable energy industry. The cost of solar installations has dropped considerably in recent years and is in fact 100 times cheaper than it was 35 years ago. We believe Ikea and Solarcentury are bringing the most competitive package to the market yet so more people than ever before can profit financially and environmentally by producing their own energy.”