Down the Energy rabbit hole

We have been somewhat loyal customers of the utility company Green Choice the past 8 years. At the time we started they had a good price for green(er) energy and some other perks that made it a no brainer for us. We extended our contracts a few times in the mean time. Coming July our 3 year contract comes to a close. Hence, we just received a new offer and we have to make a decision what to do next. But the energy market is a whole lot different today than it was 3 years ago. So I went down the energy rabbit hole….

Energy Preferences

We have a personal preference to produce as little greenhouse emissions and do as little environmental damage as practically possible. Part of that was to use green(er) electricity and forest compensated natural gas. That is how we initially got to Green Choice. Paying a slight premium for this was okay with us. Fast forward a few years and most electrical energy for residential consumers is green(er) for almost everyone (most utilities provide wind and solar energy to their clients as this is now more abundantly available). You still pay more for forest compensated gas obviously, as no real developments here.

Beside the environmental side of energy consumption, we also were quite risk avert. Knowing the horror stories from the USA (Texas comes to mind), we almost always took longer term contracts with fixed rates. The downside is that they are usually higher than flexible rate contracts… until they are not. This happened in 2022, in spectacular fashion.

We got lucky and our hunch that we would see a massive increase in energy prices at some point come true. Because we basically hedged our prices by a longer term contract, we didn’t suffer from the spectacular cost increases for utilities. Heck, at some point we paid only 20% of the going rate for natural gas and 25% of electricity. Pretty much all the years we paid too much, were compensated (and then some). It was a really smart move in hindsight. But with this bout behind us, and new developments in power storage and trading, we are considering a switch. A switch to a dynamic contract. Yeah, we are considering to going from one extreme to the other. Welcome to our lives 🙂

The Energy Situation

What does the energy situation look like in the Cheesy household? We currently produce about 5.200-5.500 kWh in solar energy. Which is nice. But we only directly use about 1.000-1.200kWh of this (and we really try to get this as high as possible). Hence, we dump well over 4.000 kWh into the energy system per year from our solar panels. In the other dark and grey (partial) days we use about 1.600-1.800 kWh of energy from the grid. This also includes cooking. For your information, the total electrical energy use for last year (2023) was 2.663kWh.

The heating is currently still done with natural gas. We are now heating our house (and providing hot water) with about 800-900m³ of gas per year. Not bad for a 195m² detached house with a horrible setup (read: large outside surface compared to the volume = relatively high energy losses).

Plan is to kick out the gas line and go full electrical with a heat pump (this year or the next). Hence, we would remove 800-900m³ of gas per year but add about 3.000-3.500kWh (making the total around and about 6.000kWh per year). But let’s ignore this for now and assume the above usage going forward to make a better comparison.

New Energy Contract Options

In 2023 we only paid about €720 all-in for gas and electric energy use. That’s just €60/month. Which is really nice, but also not sustainable considering that contract was 3 years and prices are still elevated compared to when we closed to contract.

The newly proposed contract by Green Choice, based on earlier mentioned consumption including gas is €111/month or €1.332/year. Shopping around, we actually found a few others that were slightly cheaper, albeit most were the same level or even a bit higher. VandeBron actually was a bit cheaper for a 1 year contract (due to welcoming bonus). They are also the only one that offered a 3 year contract for €126/month or €1.500/year assuming the same consumption pattern as we say in 2023 (ignoring any tax or surcharge changes).

In short, we can go the “safe” route and take a 1 or even 3 year contract and roughly know what we will be paying.

Or not…

Because there is now also the option to go with a contract using dynamic rates. These are day-ahead rates per day (gas) or even hour (for electricity, see below) that multiple suppliers now provide. They charge whole-sale rates and add a premium for their services. It’s pretty basic and generally cheaper than fixed rate contracts as there is no company that needs to hedge their bottom line. In our case, all things considered equal, we would be paying about €100/month or €1.200/year for gas and electricity. Yes, it’s cheaper, but not by a whole lot.

Major downside, if (a part of) the world blows up, prices are going to skyrocket once again. At that time you are too late to switch/lock in rates with other suppliers and you will feel the sting. As became painfully clear to many consumers in 2022 and 2023. So why switch in a time that the world can quickly blow up again? Batteries and energy trading!

Batteries and Energy Trading

Before continuing. It is important to know that you cannot get into the Energy Trading option unless you have a dynamic energy contract with specific utility suppliers. Also, the energy trading is done via an AI type black box app that is proprietary and you have no insights as to how it works in detail. I know…. The good thing is thou that you only have to buy a battery, install the app and see the money flow in (irregularly thou). I like being lazy and still earn money, while also helping the energy grid stabilize. I consider that a win-win. Anyhow, some more details and considerations below.

Home batteries

Everyone knows what a battery is. Most people know that you can also install a big one in your house (a famous one being the PowerWall from Tesla). Most people will also realize that you can therefore also use this battery to make your house off-grid (or at least for a few hours /days). Fewer people, including myself only recently, realized/know that you can also use this battery to make money. However, combining all the above might not be all be that simple though, as I found out after going down the energy rabbit hole.

Batteries are great ways to harness the energy produced by solar panels during the day, and providing this energy back to your home when the sun does not shine. This way you can greatly increase the use of your own produced energy, help stabilize the energy grid (hence lower costs for yourself and others) and in case of a grid failure, still have the ability to keep the lights on. Literally.

As shown above, we only directly use about 20% of the total energy we produce. The maximum we can use at this time is about 50-55% (we simply produce way more than we consume at this time). Considering the time and amount of sunshine, we will never make this number with current available batteries. Point in case, in December 2023 we produced 61 kWh and used 314 kWh. We would need 5 times as many solar panels + a very large battery to make this work… and that’s excluding a heat pump! But getting this 20% up to say 30% or more, would be great and better for the electricity grid at the same time.

Expensive

But batteries are (still) expensive. Prices range from €250 per kWh for the battery only, to over €800 per kWh for a fully installed system that is up and running. Depending on your goals/PV production/home use, a small 5kWh battery might be enough, or, if you want to run a house with heat pump and be as independent as possible, you need may need 20kWh or more. With the aforementioned values, this can quickly run you (well) over €10.000 for an operational system.

System Costs and Rewards

For a basic system, where you store power to use it a later time, it is not economically interesting to buy a battery. It is better for the planet, as you use less of the conventional power system, but generally not for your wallet.

Why is it not economically interesting? As due to the “salderingsregeling” the power you use and the power that you supply back to the system are subtracted from each other on the energy bill. In short, unless you supply way more to the grid than you use, a battery is not worth it due to the high capital cost to purchase.

When we bought the house we currently live in, the solar panels were already installed. But based on the usage of the previous owners. And they used way more than we do. Hence, we now have a substantial surplus of energy. A battery to use this efficiently, and sell the actual surplus at high price moments (trading), could make for a positive business case.

Energy Trading

While digging around the internet looking to see what dynamic rates would do for our energy bill, I bumped into NextEnergy, Zonneplan and Bliq (which works via Frank Energy). These companies (there are others and more coming/starting) provide battery systems and trading systems to make money from energy supply and demand discrepancies. I also bumped in this brilliant blog/podcast which has a great summary for the various suppliers of this electricity trading via battery option.

Quick side note:

The electrical energy market is divided into 3 broad categories:

• The longer term market – which follows trends and trading between 4 years and 1 month prior to delivery. This market you cannot affect with you battery. But big geopolitical movements will have a major impact on this part of the energy market.
• Day-ahead market: this is the auction market for the next 24 hours of energy supply. Here the energy prices on an hourly basis are determined. This is also where the rates for your dynamic contract are based on. So you know exactly what you will be paying for each hour of the delivery day, the day prior to the delivery day. Based on the rates, you can use your battery system to draw cheap energy and push energy back to the market at higher rates at later times, earning roughly the difference between the two. Nice.
• Intraday market: as the day progresses prognoses usually get better and real prices can be better defined. It can also be that the sun shines more, or less. Same for wind blowing harder or less. Or there might be issues at power plants. Issues with transformer stations. Less power use by people. You name it. If something changes that is unexpected, shit hits the fan and prices can fluctuate violently due to the imbalance in the system. This is where your home battery might even make you a few more euros, assuming the software you use is setup for this market segment.

Second side note: Battery System Off Grid Options

Both Bliq (white label battery) and NextEnergy (Huawei battery) have systems that can help you store energy from your solar panels and use it (partially) when the grid goes offline. Albeit you might need an additional “back-up box“, which is not included in the purchase price, to make your home fully able to go “off grid”. But at least the system is able to be modified to be used as a full backup system beside being able to be used to balance solar power & usage and trade energy due to market imbalances.

The system that is provided by Zonneplan does note allow for this off-grid option. Their system focusses primarily on trading energy for intraday market imbalances. As this has the highest earning potential. Albeit after calling them this week, the option might become available in the future if more client request this option (again, an additional box might be needed). Most currently don’t as the energy system in the Netherlands is still pretty reliable and there is no real need to be able to go off-grid completely.

Back to the Energy Trading

Let’s talk money and returns here. A general rule of thumb to select a battery based on solar power is taking the total yearly production and divide by 365. In our case that would get us a 15 kWh battery size. However, as we are trying to make money here, bigger is better (or at least lower costs per kWh storage)! The largest comparable size battery for the 3 discussed suppliers of energy trading systems is 20 kWh. All prices include installation at your home:

• ZonnePlan: €7.990 ex BTW – no monthly fee
• Bliq: €9.390 ex BTW (which you can get back) + €12/month for their trading software
• NextEnergy: €11.499 ex BTW – no monthly fee

Now, here is the big unknown, the ROI. Most money is to be made dealing with imbalances. So you are heavily depended on the parties trading algorithm. Which is proprietary and all of these suppliers have a short (or none-existent) trading history.

Zonneplan

The only one that is providing numbers (which are from the whole of 2023) is Zonneplan. There made €1.600/year with their 15kWh battery in 2023. But this was for one year. When I talked to them, they said they use this same return for their 20kWh system as an realistic yearly average. That should result in a investment recovery period of just 5 years for your cash investment. If the battery indeed lasts about 10 years (which is the current estimate). You can pretty much double your investment (all things considered equal) in 10 years. However, your battery will be written-off after 10 years too. Hence, your profit will be 100% of your initial investment over a 10 year period.

If you have a good year, the return could go as high at €2.500 apparently. That would mean a return period of just about 3.5 years. The makes for about 200% profit in 10 years.

Next Energy

Next Energy is stating a investment recovery time of about 6,5 years (confirmed this with a phone call). Which means they assume a slightly higher return than Zonneplan. However, the total return over 10 years will only be 50% of the initial investment. Again, the returns could increase in the future depending on the imbalances in the system and how well their trading app performs.

The Future?

Now, with the likely increase in power grid imbalances for at least the next 10-15 years, and the drop in battery prices, this could become even more interesting in the future. Especially with a well engineered trading system and no power major outages in your area when you are trying to provide power to, or draw from, the system.

But also keep in mind that each battery sold by any of these parties (or larger commercial parties) would in theory reduce the issues in the grid a (tiny) bit. If this catches on, as some point in the future the returns could start to diminish as the grid + storage systems become more flexible and thereby stable.

Discussion

Where we started by looking at a new energy contract, we ended up looking at home batteries and associated electrical power trading. The developments of these trading systems are still ongoing, battery technology is definitely also still very much developing. Normally we are not early adopters, but tend to follow the crowd. Or actually following way behind the crowd.

But this time we might just give it a go and be an early(er) adopter. In the grand scheme of things, we do investments with larger sums of money, and perhaps take even more risks without any social benefits. Yes, I consider helping the balancing of the power system a social benefit in the overall shift towards a greener future. Is battery technology as we know it now the most durable / sustainable solution? I don’t know! Batteries themselves are not particularly environmentally friendly. But looking at it from a lifecycle perspective, using more of our own solar power, and thus less of the fossil fuel power system (both directly and to balance the grid), seems like a smart move. Also recycling technology will likely improve, making current batteries resources for other products or batteries in the future.

Zonneplan

Which leaves us with the question, which of the currently available systems make most sense for us? The only one that has some ROI info is the Zonneplan system and the system really seems geared to maximize return on investment. The major drawbacks is that it appears less suitable for balancing one’s own solar power production and it has a white label battery (no idea who makes it and how good the quality is – no data available). They only guarantee the battery for 7 years / or 6.000 cycles. If your battery dies the day after the warranty expires, you lose a lot of return too. In short, you are kind of stuck to the supplier (and their willingness to deal with battery issues, etc.) if you want to really benefit from what the system has to offer.

Also, the trading app is relatively new and experience is limited. Furthermore, and this applies to all, regulation is also a risk too. The “Salderingsregeling” will continue for now, which increases your return. In the future this may not be the case. Taxation rules may also change and affect how the profits from the battery are affected (via the supplier or directly for you as the owner). In short, lot’s of unknowns.

Next Energy

The Next Energy system, albeit significantly more expensive, seems more solid (Brand name battery and inverter) and has the ability to be able to make our home go completely off grid. Not that this is really required in a country where the power system is currently up about 99.95% of the time. But it is still cool nonetheless. Also, it appears to be better capable to maximizing the solar power for own use (so also focused on the day-ahead prices/solar production, rather than intraday imbalances). But since the details of the trading app are not known, I cannot be 100% sure on this. Next Energy is using Huawei battery systems. Which means that they are modular, easily replaced or expanded to larger capacity if needed/required. It is also a supplier that has a proven track record for solid battery technology.

Bliq

This system is pricewise the middle of the road. Again a “white-label” battery system, expanding or replacement can be more difficult when there are issues. Currently the system focusses on day-ahead prices only (hence, primarily optimizing your PV power supply and use), they will add trading with imbalances later this year. Which should improve it’s ROI. Downside is that you have to pay €12/month to use their trading software, which is a fixed cost, also if you system is offline or there are other issues with the trading system/platform. It also means that the bigger systems become relatively cheaper to operate.

Other considerations

On other consideration that we still need to check, is home insurance. When professionally installed, this likely won’t be an issue. But I want to check with our insurer to see if there are any limitations or impacts. (Note: actually called them to check, the battery has no impact on the property insurance coverage or rates for us)

Furthermore, if we do get a battery, we would thus have to switch from our current fixed term energy contracts to dynamic energy rate contracts. This inherently causes cost opportunities (lower overall costs most of the time, especially with the battery trading as a bonus) and risks (really high prices when shit hits the fan). Considering the fan spinning quite hard in 2022, shit can fly really far too apparently. That being said, we really improved the house, and will do some more in the future, to make it even more energy efficient. Hence, we are limiting how hard the fan is spinning here. It might therefore not be a bad idea to take a gamble, buy a battery and make the switch.

To be continued….