10 predictions for the energy market in 2024

Andreas Thorsheim, founder and CEO of Otovo, Europe's leading marketplace for residential solar installations and battery storage, has sat down with Otovo’s experts in supply chains, ESG, technology and policy to give an outlook on the energy market for 2024. Here are their main points:

• With permitting stalling in offshore wind, large-scale solar and amid nuclear setbacks, 2024 will become the year where the humble households will be doing the main work to hit the green targets for Europe. In 2024 we will see record installations of solar, batteries, heat pumps and the highest ever electric vehicle sales.
• Facing increasing energy prices and grids under pressure, the rise of batteries, either as a complement to solar or as electric vehicles with bidirectional loading is unstoppable.
• Now, the main task of governments across Europe will be to support green technologies coming together instead of dreaming of green manufacturing in Europe

1. Energy prices will rise by up to a third

Even though gas prices this summer were briefly at their lowest level in two years and many consumers thought they could breathe a sigh of relief - it was a short respite. Disruptions in LNG imports, gas pipelines and increasing conflict levels seem to have reversed that trend. The recent tragic developments in the middle east will make the fossil fuel supply even less predictable. Following the European Commission Electricity Market Reform, there should be less variability to consumers, but that should not be confused for meaning price will be down on average. As input prices increase and grid costs rise, consumer electricity prices in 2024 will probably trend upward in all European markets. For example, in comparison to the annual average of 2023, household electricity prices are expected to increase by 31% in Norway, 35% in the UK and 23% in Germany*.

2. Prices for solar will drop by more than 50%

The combination of rising energy prices and rapidly falling solar construction costs make the PV business case for consumers more attractive than ever. Since February 2023, we have seen a surprisingly strong return of labor costs to pre-crisis level, and we believe progress to be maintained throughout 2024. Furthermore, solar panels will hit all-time low prices. At the end of 2023, 80GW of panels stood in European warehouses, equivalent to the previous two years' worth of installations for the entire continent. Prices have taken this imbalance into account, and panel prices are expected to hit all-time-lows in the beginning of 2024, before bouncing back later in the year as supply and demand balances out. We expect declines of at least 50% for solar construction costs from the first quarter of 2023 to the first quarter of 2024, and then approximately 1% decline per month from then on. There has never been a better time for households to invest in solar.

3. Batteries will kick off their victory march

2024 will be an important year for the rise of batteries. Their prices will follow a similar path to solar panels, becoming more affordable and easier to maintain. In the face of rising energy prices, batteries offer great returns to homeowners who can benefit a lot by becoming independent from the local grid and increasing their self-consumption. Without a battery, the self-consumption rate of a PV system is about 40 to 50%, with a battery it can be doubled to 80 to 90%. By 2030, we expect all PV systems to come with a battery attached, contributing to a truly distributed storage network. Most analysts have battery prices coming down abruptly in 2024 after slow progress in the last two years, and we believe this change in cost levels will trigger an acceleration in adoption. Facing an increasing demand of electric power, many grids will be subject to big investments. Hundreds of thousands installed home batteries will significantly help to reduce investments in the grids. However, this next transition will remain on a bumpy road if energy retailers are emphasizing setups like “virtual battery” or “remote compensation between multiple homes” that slow down the penetration of batteries, and do nothing to address and balance the needed grid upgrades.

4. Solar, EV’s, heat pump & batteries: The fabulous four green technologies are coming together

2024 will be the year when green technologies come closer together. This means a big change in the current situation, with governments having so far mainly subsidized one “pet technology” . In Norway, for example, 70% of households have heat pumps, and fossil fuels have almost completely disappeared - but PV penetration is at 1%. In the Netherlands, one in four households already has a solar system, but hardly anyone has a battery storage system. In 2024, consumer awareness of the great added value of combining green technologies in their households will increase. We expect a total of 6 million green tech installations across Europe in 2024 – 2 million solar homes, 1 million heat pumps, 0.5 million batteries and 2.5 million EVs to be sold – the highest number ever seen, with a rise of smart energy management systems making the “fabulous four” working together. If governments react accordingly now, private households can do the work to hit Europe’s green targets.

5. One of the biggest trend for this decade: EVs with bidirectional loading will roll out at scale

EV manufacturers are rolling out bidirectional charging, opening the door to true vehicle-to-grid (V2G) and vehicle-to-home (V2H) applications, allowing more power to be exchanged. In addition to models that currently support bidirectional charging, in 2024 many new models from various car manufacturers (e.g. GM, Volvo, Renault) will join the row, making it the first year where this technology gets rolled out at scale. Households can start to use their car as a battery, backing up their home power supply in times of outage or arbitraging power price variations. This completes the cycle of homes as decentralized energy hubs. Taking into consideration that most cars will be out and about during the day and back home when energy demand increases, the combination of PV, battery, heat pump and EV (charger & V2H) will give the highest possibility to be independent from the grid.

6. VPPs will reduce dependency on fossil fuels

VPPs (Virtual Power Plants) are a matter of when, not if – and that depends on the speed of the renewable energy transition in Europe. By storing excess energy and providing stabilization during spikes and dips, VPPs can reduce the power industry’s dependency on fossil fuels and actualize the transition towards net zero through intelligently utilizing renewable energy sources. VPPs are getting their fair share of credit and hype in the energy sector, with energy experts and investors judging VPPs as a promising asset class. This will naturally filter through to the wider public and political circles as the benefits are more widely understood. This development will be driven by residential record installations of solar and batteries in 2024. The more people are able to participate in making money by pooling together their batteries and solar panels, the more widespread the phenomenon will become.

7. Energy management systems will turn houses into energy hubs

Customers have a growing awareness of how they can optimize their energy consumption. They are increasingly moving from pure consumers to active market players in the energy system, dealing with questions about meter optimization and how they can contribute back to the grid. This leads to more different green technologies in households which help to optimize the user consumption and production, while at the same time minimize the exposure to external price volatility. With households turning into decentralized energy hubs, we will see an increased role of intelligent Energy Management Systems. It is not the hardware which makes energy consumption smart, it is the system controlling the hardware.

8. Renewed efforts to create green solar manufacturing in Europe will stall

We will likely see renewed efforts and investments to create European manufacturers in solar energy, which is essential - but with limited immediate results. Many European politicians dream of more European manufacturing capacity in green technologies, but the continent remains reliant on Asian imports for as much as 95 percent of these technologies, making any quick change unlikely. Politicians won’t sacrifice green technology rollouts by banning or taxing imports, so the efforts in jump starting significant green manufacturing will probably fall short in 2024. Nonetheless, a “two lane policy” will be crucial where European content should be encouraged and we also assure supply of Asian and internationally produced renewable technologies while we develop our own capacities.

9. Subsidies and incentives: Politicians will show their hand

2024 will be a crucial year in terms of how governments position themselves on the energy transition. Some politicians will flake on the green transition, while others will show their resolve and get the job done. Rishi Sunak and the UK Government seem to be putting the handbrake on, while Olaf Scholz and the Germans are doubling down on EVs, solar, and batteries. Although in times of increasing energy prices, green technologies in most cases do not need subsidies to be profitable for consumers, they boost interest and put the focus on where it is most needed. Subsidies drive choices. Governments most at risk of being too slow are Norway, Britain, Spain, the undecided are the Dutch and Swiss, while the progressives are Portugal and Italy, Sweden is at the progressive end.

10. The labor shortfall in solar will turn out to be a myth

European solar workers are not a scarce resource, as predicted so many times during the past years. In 2023, the industry began to tackle quantity, with Poland taking the EU lead for solar job creation, followed by Spain and Germany. Hitting 648,000 workers across Europe in 2022, the sector is set to reach 800,000 workers in 2023, and 1.2 million by 2027 in SolarPower Europe’s most-likely scenario for EU solar market growth. Short training periods of about 13 weeks are one of the solar industry's great strengths.With the solar workforce boom almost in line with solar market growth, labor shortfall in solar will turn out as a myth in 2024.