Journal Article

What drives the profitability of household PV investments, self-consumption and self-sufficiency?

July 5, 2017

Applied Energy, Vol. 204, October, 2017, pp. 1-15

  • Simulation model to analyse profitability of household PV and storage investments.
  • Consideration of technological, market-based, political and geographical drivers.
  • Comparison of PV-based self-consumption and self-sufficiency in Germany and Ireland.
  • Household electricity demand from grid may fall to 25% in Germany/35% in Ireland.
  • Strong self-sufficiency incentives in Germany may lead to distributional challenges.

Many countries introduced subsidy schemes that were successful in incentivising investments into residential solar PV. The resulting growth of the global PV market was accompanied by cost reductions for PV systems, reductions of PV subsidies and, often, increasing electricity retail prices. Along with decreasing costs for battery storages, these developments made self-consumption and self-sufficiency continuously more attractive. However, the profitability of PV-storage systems depends on many factors, including technological, political and geographical aspects. We present a simulation model to identify the most profitable sizes of PV and storage systems from a household perspective and explore what drives the profitability of self-consumption and self-sufficiency. We compare and contrast Germany and Ireland to account for regulatory and geographical differences. Our results show that PV-storage systems are generally profitable in Germany and that, after minor technology cost reductions, this result holds even in the absence of subsidies. In Ireland, such systems are not yet profitable but this may change soon with expected technology costs reductions. The share of electricity demand that will be required from the grid may be reduced to 25–35%. Implications for the electricity retail business and policy makers are discussed including distributional concerns and system efficiency considerations.