In February, we started building Retrofitted, a ‘one-stop shop for decarbonising homes.’ Since then, we’ve been retrofitting all kinds of climate technologies, including insulation, solar panels, and batteries. On that journey, we spoke to hundreds of UK homeowners and learnt many invaluable lessons – some obvious, some counterintuitive. capture.energy is a natural result of this learning process. In particular, three insights have led us to full conviction that capture.energy is the way to decarbonise UK homes. Let us tell the story of how we got there.
In May, we had just started offering our first customer projects in Solar PV. To be more precise, we started offering packages of solar panels + batteries. Nonetheless, we refer to this just as “Solar PV”, because solar panels were typically the focus of our customer requests–while batteries were merely an afterthought. We like to call this the ‘solar-first perspective.’
This was the case until a savvy customer, Alan B., asked us to create a business case for a battery-only setup in addition to his battery + solar quote. The software our installation partner was using didn’t even account for such a case. So, in the spirit of ‘doing things that don’t scale’, we built a (very large) model ourselves. At around 13 years, the payback on Solar PV was consistent with our installers’ software projections. However, the big surprise was this: A battery-only project showed a much shorter payback period of only 7 years. This is a massive difference and represented a true revelation for us.
Looking at the fundamentals, why is this case? There are two major reasons:
First, the value of power production is decreasing while the value of storage is increasing. In 2023, solar and wind already accounted for about one third of UK electricity generation, up from a quarter just five years ago. By 2030, this share is projected to increase to more than 50% in most of the National Grid’s Future Energy Scenarios. As remarkable as this progress is, it doesn't come without challenges:
Already today, the problem is that sunny or windy hours are often not when demand is highest and that solar panels and wind turbines are “intermittent”, following the rhythm of nature. As consumers increasingly adopt heat pumps and EVs and industry adopts electrified processes, this creates huge challenges for the electricity grid, which was built for an age where sources of power could be easily turned on and off and where fossil fuels were dominant for heating and transport. The more progress we make in PV, wind, EVs and heat pumps, the less stable the grid becomes!
This leads to a quirky outcome: There are times when the grid is flooded with renewable power that nobody needs at that moment. During these 'negative price periods,' producers might actually have to pay to offload their excess electricity. The frequency of such periods has been rising dramatically: from just 5 hours in 2021 to 100 hours in 2023, and potentially reaching 1,000 hours by 2027 (see Figure 1). Batteries can capture these negative price periods and discharge when electricity is most needed, and therefore most expensive.
Second, while the cost of solar installations has started to level off, battery prices are still dropping at an impressive rate. Although solar panels continue to get cheaper, the pace is slowing, and the impact on overall costs of an installation is limited. It may surprise you that panels make up only a small proportion of costs in a residential solar PV project without batteries–typically around 10-20%. The truly expensive parts are pre-installation surveys, scaffolding and installation, which can be incredibly complex and subject to heavy regulation. These are unfortunately areas where only limited cost reduction potential exists.
Batteries, on the other hand, do not need scaffolding, are much less complex to install and are still decreasing in price at a rapid rate (see Figure 2).
In Alan’s case the true value driver was the battery and not the panels. After seeing it once, we have seen the same pattern play out again and again, particularly for solar projects that had just a bit of added complexity, such as dormer windows or a non-standard roof shape.
Inbound requests for battery-only installations are currently an exception. However, when presented with the options, we are seeing more and more customers opt for the battery-only option rather than the solar + battery package. Ultimately, we need to shift our–and our customer’s–thinking from “solar-first” to “battery-first”.
2. Decentral is beautiful
Grid-scale battery parks have lately drawn a lot of attention. The Economist recently called them "Clean energy's next trillion-dollar business". So why are we taking such a contrarian approach by focusing on decentralised batteries? For two reasons:
First, they are needed. All levels of the grid need balancing: It is as important to keep supply and demand in check in your street (on the level of the “distribution grid”) as on the higher-voltage-level (the “transmission grid”). In fact, of the EUR 500-600 billion needed annually to prepare grids for a renewable future, over two-thirds must be invested at the distribution grid level. (see Figure 3). However, grid-scale battery parks, typically located where space is abundant, help mostly on the transmission-level. This leaves a massive gap on the level of the distribution grid – a problem that is compounding year by year, as network operators struggle to deliver the unprecedented scale of infrastructure buildout required for the renewables transition.
Second, decentralised systems can offer even more attractive returns. A typical grid-scale battery system in the UK has been returning between £40,000 and £60,000 per megawatt (MW) of capacity in 2023 (Modo Energy). One MW of grid-scale storage costs about £600,000 for a “two-hour system”, that is, it has 2 MWh capacity (Modo Energy). Decentral systems are about 50% more expensive, at about £900,000 / MW / year, based on the £4,500 we charge for a fully installed 10kWh battery with a 5kW inverter. However, they are also 3 to 4-times as profitable (see Figure 4):
Bundled into a virtual power plant, decentral systems can create most of the same revenue streams a grid-scale battery asset can, valued at about £40,000 and 60,000 / MW / year. In addition, however, there are two more revenue streams for batteries at the distribution level.
(a) It can also access so-called “local flexibility markets”, which are markets where the local distribution grid operators reward those who help balance the local grid by adjusting their consumption up or down at certain hours. This is done via long-term contracts, ranging between £25,000 and £100,000 / MW / year. Flexibility at this level of the grid can be particularly valuable, as the build-out of distribution infrastructure is what grid operators need to invest in most (see Figure 3). We recently secured such contracts at an average value of £67,000 / MW / year.
(b) When using a battery for power arbitrage, decentral batteries can significantly benefit from “co-location”, that is, from having storage and demand directly next to each other. In the simplest case, a homeowner or a business can just charge up their battery at a cheap overnight rate between 7p and 10p / kWh, and power the home from that charge during the day, where they would otherwise pay around 25p. Doing so every day with a 5kW inverter and 10 kWh battery system yields an annual benefit of up to £660, or £130,000 / MW.
Importantly, this can be done without sending power through the grid at times when it is congested, and therefore expensive to transport power. This is a key distinction to grid-scale batteries: If one wanted to charge up centrally in a utility-scale battery and discharge to households during peak hours (historically between 12:00-14:00 and 17:00-19:00), one would have to incur very substantial grid charges of about 10p / kWh (see Figure 4).
Naturally, some of the revenue streams cannot be accessed in parallel. For instance, one cannot at the same time, with the same asset, get paid for balancing the grid and making arbitrage. That means it is key to continuously scan for the most profitable use of one’s battery capacity. We believe that doing so smartly with decentralised battery assets can generate annual benefits of around £200,000 / MW–already today. To give you a sense how disruptive this is for the value proposition of home batteries: For Alan B., a smartly managed battery creates a payback of just around 4 years.
3. Simplicity can be our edge
A typical household could cut its electricity bills in half simply by installing a battery – already today! Yet, despite the crystal-clear benefits, few households or businesses are doing it. Why? Because the market lacks a truly compelling, simple product.
Batteries are marketed purely as hardware—the true value driver, the software running them, is often neglected. Existing solutions are either "smart and expensive" or "dumb and cheap." Navigating the complex landscape of time-of-use tariffs can be daunting. Accessing additional revenue streams, such as local flexibility markets, is practically impossible with most battery products today. Add in the hefty upfront costs, and it’s no wonder adoption is slow.
We aim to break down these barriers through capture.energy: the UK's cheapest electricity, enabled by (smart) batteries. If you are based in the UK and would like to cut your electricity costs dramatically, join our waitlist or get in touch at clemens@capture.energy.