Residential energy storage company sonnen is creating innovative solar-plus-storage products, aggregating distributed assets to create virtual power plants, and becoming an energy company that is shaking up the utility space, delighting customers in the process.
If you follow the energy storage space, you probably know that sonnen – a subsidiary of Shell since it was purchased in March of this year – is the leading global company in the residential storage business. According to its website, the company has active markets in Austria, Australia, the Czech Republic, Finland, France, Ireland, Norway, Portugal, Spain, Sweden, and the United States (the company just announced a 5 MW, 12.5 MWh virtual power plant in Utah last month).
The company’s latest announcement comes out of Australia, where it has teamed up with developer and installer Natural Solar to create a virtual power plant that will eventually include 3,000 homes by 2021. Each residence will have solar panels combined with batteries and will be selling various services back to the grid, coordinated by sonnen software in one of the world’s largest virtual power plants to date. Each residential customer will also no longer get a bill from the local utility. Instead, customers will pay sonnen a fixed monthly fee, through its new product called “sonnenFlat.”
Nearly two years ago, in October of 2017 Australian homeowner Stephen Fenech became the first customer to take the plunge, putting down $19,000 (Australian – approximately $13,000 USD) upfront in order to nearly zero out his power bill for the next 20 years. That investment got him 27 panels rated at 280 watts (about 7.6 kilowatts (kW) in total), plus a 10 kilowatthour (kWh) sonnen battery. The system produces an average of 27.4 kWh daily.
In the latest 12-month period, that investment helped Fenech cut his quarterly power bills to his four-bedroom, three-bathroom home by over $610 (AUS). In addition, since he powers his electric vehicle from the system about half the time, his annual savings on ‘petrol’ costs also exceed $1,000. The combined 12-month savings streams totaled $3,428, representing a return on equity that gives him a simple payback period of about five and a half years, with projected savings in today’s AUS dollars of over $68,500 over the expected 20-year lifespan of the investment.
To better understand how the pieces of this deal came together, I spoke with homeowner Fenech, Natural Solar’s CEO, Chris Williams and sonnen executives Nathan Dunn (Managing Director of sonnen Australia) and Christoph Ostermann (CEO).
Natural Solar leaning heavily into storage
Natural Solar has made a name for itself as Australia’s leading solar and battery installer, and CEO Williams has big plans for the company. Beyond this 3,000 residence project, he indicates there are some other big 1,000-plus home developments in the company pipeline. As the project developer, his team engages with the customer, explains the value proposition, inks the deal, and then ensures the integrated system is installed so that it performs safely as expected, and is connected back to sonnen’s intelligent aggregation and dispatch platform.
The initial customer conversation, he says, is generally based on emotion. “One of the main drivers under sonnenFlat is that it doesn’t matter when you use that power. And seasonal variation doesn’t matter any more.” The customer gets energy at the same price every day whether from solar, batteries or the grid. “The main element customers gravitated to was peace of mind,” Williams says.
Natural Solar’s focus is the new home market, where it is a fairly straightforward proposition to integrate solar with batteries and combine it with home automation during the development and construction process. This creates residences with back-up power, lower electricity bills, and a more efficient energy ecosystem. Williams cites a forthcoming project in Sydney involving 75 homes with solar, batteries, and Amazon or Google home automation tied to these systems, and comments, “I think that’s where new build is headed.”
One reason he decided to take his nine year old family-owned business in this direction was that solar itself was already highly commoditized (Australia already has over 2 million households with rooftop solar). Solar installation is a faster process with lower capital costs, he notes, but there is so much additional value to be gained by adding batteries to the mix that he has embraced storage as a key differentiator. Williams indicates that the battery is the most expensive part of the system, representing approximately 55% to 65% of the total costs. However, he says the additional cost is justified by the value creation potential from the lithium iron phosphate sonnen technology that is stable and warrantied for 10,000 cycles.
The company installed its first home battery system in early 2016; today over 95% of its customers request storage, including some looking to retrofit batteries into existing systems. With the sonnenFlat product, he comments, “70-80% of customers pay upfront for the system, based on our demographic.” The solar-storage combinations can also be financed by a third party and set up to be cash flow positive (relative to the electric bill one would have paid) from day one, and the economics are attractive enough that many customers can own the system outright in as little as seven or eight years.
With the various activities the storage systems perform (including the storage and release of rooftop solar for self-consumption as well as the rapid and often more shallow cycling necessary to support sale of services to the grid through sonnen), the battery averaged 1.7 daily cycles in the first year, but he indicates they could comfortably accommodate as many as 2.7 cycles daily under the existing warranty.
sonnen’s Dunn characterizes the sonnenFlat product as being similar in nature to the company’s offerings in other countries. Instead of getting electricity from the utility or a competitive retail supplier, consumers pay a fixed price upfront, and a flat monthly fee in exchange for a fixed energy allowance. In Australia, there are three different plans, based on annual consumption levels: 7,500 kWh for a smaller residential dwelling with three or fewer inhabitants; 10,000 kWh for a somewhat larger family; and 12,500 kWh for a family and dwelling with a more extensive building footprint. Having a fleet of batteries to deploy at sonnen’s disposal, Dunn says, “enables us to do a raft of other thing in relation to selling energy on the open market,” which helps the company offer a more attractive price to the customer.
sonnen’s CEO Ostermann explains that a critical part of making this value proposition work is the company’s proprietary Virtual Power Plant software, developed by a Berlin-based team of experienced specialists. The company’s software constantly observes critical parameters such as grid frequency and can manage each battery’s charge and discharge power separately if necessary. Based on those measurements an intelligent algorithm in sonnen’s software determines how long and how deep to dispatch each storage asset to either inject into or absorb power from the grid.
If directed to do so, for example, the batteries can react to grid frequency deviations or other defined signals in a matter of seconds. As markets and opportunities grow, there is always room to add more features. “We are investing heavily in deploying this piece of software into further use-cases,” Ostermann explains, and the company has made its Virtual Power Plant software compatible with utilities’ systems: Utilities can purchase a Virtual Power Plant software licence in a package with sonnenBatteries and dispatch their sonnen assets.
The voice of the customer
Stephen Fenech, the inaugural sonnenFlat customer loves what he has experienced so far. He’s a tech journalist (just what one might expect from an early adopter) and comments that his first meeting with Natural Solar took place on July 1, 2017, which also happened to be the day that new electricity tariffs were posted, increasing costs, he says, by 20%. “So it made clear I needed to be doing something. I needed to step out of this cycle.” He heard about the impending launch of the sonnenFlat product from the Natural Solar team and wrote about it. After investigating further, he ultimately decided to take the plunge in October of 2017.
So how does it work? The panels sit on his roof and, the battery is in the laundry.
“It sits against a wall only 20 centimeters deep and it’s not intrusive. It’s connected to the Internet. The panels work during the day and I use power they produce, while excess power goes into my battery. All sonnen owners are linked, so we are all part of this power plant.”
He pays a flat fee of $40 per month, which he likes. “It is predictable, there are no nasty little bill shocks and surprises – it’s cheaper than my cellphone plan.” And like many early adopters, he’s an effective disciple.
I have showed it to a lot of friends and neighbors…Everybody thinks ‘I’d like to do this, but I don’t know where to start.’ So I showed it, and explained what was involved and roughly what the price would be. A couple of my friends now own systems.
And he enjoys the savings. He no longer pays a variable local utility bill. In fact, he doesn’t get a bill from Energy Australia at all.
My energy company is now sonnen. My energy bills used to be 3,500 to 4,000 dollars a year…I drive a Tesla Model S and charge half the time here at home…I not only save on my electric bill but also on fueling my car.
Fenech is now looking at expanding to potentially add more cells, since the family is eyeing a second EV in the foreseeable future. In short, he’s rather thrilled at having taken the plunge.
I knew I had to do something. I was tired of being at the mercy of the power and petroleum companies. I wanted to be able to step out of that circle. I wanted to be able to have some certainty in the power for my home and the energy to run my life. I thought this was the best way of doing that. and I think I have achieved it.