Costs have fallen so rapidly for battery storage capacity that within two years the technology will be cheap enough for households with existing rooftop solar systems.
That is according to a new report published today by the Renewable Energy Agency (REA) and consultancy KPMG, which found that by around 2017 the cost of lithium ion storage technology will have fallen low enough for early adopter households and businesses to retrofit it onto existing energy generation systems.
The report - which also focuses on the growth of demand response systems - suggests larger grid-scale storage systems are already economic in certain circumstances, although regulatory and market barriers make it difficult to secure funding.
Current institutional frameworks and industry regulations in the UK's capacity market are designed around incumbent generators, the report found, and are not equipped to handle an influx of small-scale storage systems into the market. This is holding back the development of the market, the report suggests.
The development of commercially viable battery storage systems is seen as crucial for alleviating intermittency issues posed by large-scale integration of renewable energy onto the electricity grid.
The REA is calling on the government to make a number of market and regulatory changes to boost the development of decentralised energy, including opening up opportunities for new local energy market arrangements that encourage smaller-scale systems to come online, and introducing new price signals such as "time of use" tariffs to incentivise investment.
REA chief executive Nina Skorupska said 2016 is set to be a "breakthrough year" for energy storage and demand response systems. "This report shows that storage is already upon us and whilst traditional fuels like nuclear and gas are needing increasing help from the government, the cost of renewable technologies are coming down and many companies are looking forward to the post-subsidy business model," she said in a statement.
"We are not asking government for subsidies, what we need is a stable policy environment that has been so lacking in the past year, coupled with a common sense approach to regulation and the ability to fully participate in the electricity market," she added.
The report comes on the same day as new analysis from the World Energy Council (WEC) predicted storage costs will fall as much as 70 per cent over the next 15 years. However, it found that there is still too much focus on the investment cost of energy storage, which is leading to the perception storage technology is more expensive than it actually is.
The focus on investment cost ignores the system value of stored energy, the report found, which provides additional benefits such as ensuring security of supply and the capacity to even out peaks and troughs in demand.
Last week the Secretary of State for Energy and Climate Change Amber Rudd indicated the government is currently looking at ways to drive development and improve regulation of the energy storage sector.
Speaking at an event in London, Rudd said her department was exploring regulatory options that would give the industry the incentives needed to expand.
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