Does Tesla’s Powerwall Make Financial Sense?

MAY 21 2015 BY PEDER NORBY 20

Powerwall Coupled With SolarCity PV Installation

Powerwall Coupled With SolarCity PV Installation

We’ll get to the math below soon, but allow me a couple of rambling paragraphs as prelude.

Did it make sense in 1983 to pay $10,000 in today’s dollar (adjusted for inflation) for the first commercially available cell phone, the DynaTAC 8000, that had a talk time of 30 minutes, took 10 hours to charge and worked in less than 1% of the United States?

Did this make logical sense when you could during the same timeframe, walk into a Sears, buy a corded telephone for $19 that worked all over the world and that cost much less per minute to use?

History answers that question for us with a world changing YES, going from one cellphone in 1983 to over 7 billion cellphones in 2015. What was once so expensive and so exclusive, is now in the hands of everyone, by the way with battery energy storage that keeps on improving.

*Editor’s Note: This post appears on Peder’s blog. Check it out here.

So too I am sure, one day in the not so distant future, battery energy storage will be the hands of everyone for their home and their cars. Remember this cellphone example when I do the math below.

Did Tesla invent battery energy storage?  No. Did Starbucks invent coffee? No.

Inventor Of Coffee?  No...

Inventor Of Coffee? No…

Love them or not, Starbucks “reinvented” coffee and convinced us it was ok to pay $2.00-$5.00 for a cup of coffee…everywhere…several times a day.

Get ready to say Tesla Powerwall in Tall, Grande or Venti sizes soon as Tesla reinvents battery storage.

If you have been following our 12 month journey “The drive to Net Zero Energy” you’ll know that our family lives in a home and drives two BMW i3’s with zero energy bills and zero gasoline cost all powered by Solar PV.

Net Zero Challenge

Net Zero Challenge

Let’s take look at our energy use and generation for last year. A year that ended with a $~450 energy credit to us.

Net Energy Metering Summary

Net Energy Metering Summary

If the premise is that you can take energy from the sun during day light hours and then store it to use during non daylight hours, the Tesla Powerwall is a huge money loser for most Solar PV users at the moment, due to “Net Energy Metering” agreements (NEM) and Time of Use (TOU) rates.

California and many other other states have NEM agreements and TOU rates for solar PV system owners.  In fairness to Elon Musk, he pointed that out in his presentation with his comments about how in the near term, emergency back up is the best utilization of the Powerwall.

The NEM agreement, simply allows you to sell excess electric energy generation to the utilities generated during the day or longer summer months at the same price that you buy the energy from the utility at night or shorter winter months.   At the end of the year, if generation equals use, the bill is essentially zero. The NEM agreements last for at least 20 years.

TOU rates are two to three times higher during the peak hours (see chart above as we generate more during peak period) than they are during off peak hours.  Most of the large cities in California will have peak rates averaging $0.35 per kwh average of summer and winter rates, off peak $0.22 cents and super off peak $0.15 cents.  Essentially it’s a 2-1 sale by using energy at night.

In our example, being grid tied to the utility, the result is no utility bill or gasoline cost.   Many argue both pro and con that other utility users are subsidizing solar PV customers, but I’ll leave that for another day. Let’s just say if I went off grid those same folks would say that utility users have to pay more since I’m not paying to be tied to the grid that comes to my home.  Sometimes you just can’t win.

If I used a Tesla Powerwall to go “off-grid”  I would not get the financial arbitrage benefit of getting paid for excess generation during peak hours thus instead of an annual credit, I would have no utility bill but a large new expense for the Powerwall.

How much of an expense to go off grid?

I would estimate that our home and our two cars use an average of about 30kwh a day.   Roughly 10kwh for the 2 cars and 20kwh for the home.  Most off grid folks recommend 4 times the use to cover winter storms and the lower sunlight months of winter.

BMW i3 Power By Solar

BMW i3 Power By Solar

So let’s assume a 100kw battery system for our home and cars.  It’s just a guess since Tesla did not release the price for their larger units, but let’s say the price is $30,000 ($300 per kw) and another $10,000 for installation for a total of $40,000.

Assuming a high cycle life of 5000 partial cycles or about 12 years, I would need two of these systems during the 25 years of the Solar PV panels lifetime.  Again assuming a reduction in cost of half, 12 years from now and minimal installation expense as it’s a swap out, the second system will cost me $20,000.

That’s $60,000 for 25 years which equals $2400 per year for an off grid setup.   Grid tied I have a $~450 annual credit. So the math does not add up, but remember that first $3,500 cell phone and today’s 7 billion cell phones as a strong lesson here.  Do you think the first cellphone purchasers cared about the economics of the cellular phone call?

That's A Cellphone?

That’s A Cellphone?

So it begins with battery energy storage and the Powerwall.  Not yet a convincing financial equation for most homeowners with Solar PV, but a technology that is sure to to usher in the future.

As a solar PV homeowner and a multiple electric car driver, energy storage is the missing piece and I’m very excited to see Tesla and the Powerwall tackle this issue.  Energy storage will be a great enabler of renewable energy and our transition to electric zero emission transportation and cleaner air for our cities.

Today for the Powerwall,  last mile installations far away from power-lines,  new infrastructure projects without the needs for power-lines and utility scale energy storage make the most sense.

In the near term, “rate shaving” as high TOU rates creep into the darkness hours of early evening and we use the battery to cover that small time frame of dusk hours will begin to make sense.   In the long term it will make sense for all of us as prices fall and the technology advances.

There are other bright spots in addition to battery energy storage as well.  Our cars can each hold 20 kwh – 85kwh  of energy and vehicle to grid applications are developing to use that energy for the home or the grid.  New solar PV inverters come with a separate 15 amp, 1500 watt circuit that can deliver 7 to 10 kwh of electricity when the grid goes down each sunny day.  This is similar in quantity of electricity to the Powerwall.

In closing…when you use that cell phone of yours  to make your next call…remember how it got here and where it came from.

First communications, and now energy and transportation,  all three can be thought of as “internets” and they’re all going to work together in the future to solve some of our worlds most vexing problems.

Bravo Elon Musk, Bravo Tesla and the Tesla Powerwall.

Categories: Battery Tech, Tesla

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20 Comments on "Does Tesla’s Powerwall Make Financial Sense?"

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Jouni Valkonen

It is not that simple math. First, Tesla Powerpack costs $250 per kWh, not $300. Secondly your solar panels has 25 year warranty. The end of warranty is not usually the end of their lifespan + solar panels has good recycling value. Similarly, 10 year battery warranty is probably not the end of their useful life and in any case batteries have rather considerable recycling value.

More important however is that it is not that relevant what is the cost of batteries but what is the value of batteries. Distributed batteries allow more clean energy integrated into grid and also they lower the peak prices of grid electricity.

Therefore, it makes financial sense for both Government and grid utility companies to subsidize battery investments. About 30 to 40 % of the investment price of batteries can be subsidized to offset the value that distributed batteries are adding to the grid.

Therefore with these simple error corrections Tesla batteries are starting to make increasingly good deal. The difference is not significant and it is well within error bars, even in United States, where grid electricity in general is cheaper than e.g. in Germany, Australia (and Hawaii).

jmollard

Absolutely, this article is very misleading. California provides particularly good incentives for installing PV, so batteries would clearly not make economic sense. State incentives very widely. A well researched article would have provided a table by state with data from here:
http://www.eia.gov/electricity/sales_revenue_price/. And to really do it properly all costs and incomes should be included and NPV applied.

DonC

What a storage system like the one being offered by Tesla does is prevent the electrical utilities from getting blocking bypass. In CA the utilities took a run at this in 2013 but got shut down. However, they wrangled a limit on the number of net metered houses they had to accommodate and put a time limit on how long they had to offer net metering. Taking the long view the utilities no doubt calculated they could contain the bypass problem at the residential level.

A storage system like this kills that idea. When my net metering period is over I’ll probably get one of these systems, and the prices should be lower.

However, in states where the utilities have managed to block net metering, systems like this will be immediately practical.

Jeff Songster

Exactly right… The only reason I don’t think this works for me is that I got microinverters and this thing is set up for string inverter installs…. AFAIK. So I only bring AC off my roof. All my components are covered by warranty for 25 years not 10. I would rather add panels in 5 to 10 than have to replace the string inverter. So… while I would love to use something like this… seems like V2H for our 2 Nissan LEAFs would be a much better investment for my situation… if Nissan/Nichicon would just sell them here.

ja

Yea, Cell Phones The “Brick Phone” Had Quite A Big battery & More Than 30mins talk Time…I Had One & So I Know….It was was Just As Well Though., they Put Out Lots Of Analog Watts/Radiation, With Little Restriction Back Then & ,U’d Glow in the Dark If U Used It Too Much . It Would Kill U If The The The $.50cents Plus DAY/NITE Per minute Charges Didn’t. Or Take To the poor house First!…I knew Some IDIOTs In Real Estate That would Run Up $650.00 To $1500.00 plus $$$ YeA Monthly Cell Bills., BACK THEN ..Just To Show Off & Be KOOL, While The Majority Pretend Talked To Show they Were Hot Shot Real Estate Agents Too, ….Wanna Be a Kool Fool? Wanna PLAY ??Ur Gonna PAY!!!

ffbj

I get your point but don’t you sort blunt it when you say the majority where pretending to talk on their cell phones, since this would cost them nothing?

In the future, if I built a tiny-house on the side of a mountain, I’d put up solar & buy a powerwall. No grid necessary. Where I live now, it doesn’t even make sense to go to solar power.

Speculawyer

Where do you live that you feel solar PV makes no sense?

Bill Howland
I’m glad he broached this topic: It was the topic of discussion at the EV club I belong to as the only foreigner in Hamilton, Ontario, Canada tuesday. The club also had trouble justifying the powerwall using the spreadsheet calculator, but then, Ontario even while diminishing for new installations (38 cents / kwh – with a totally separate service for the solar, i.e. 100% of solar production is sold to the utility and *NONE* is used by the home the system is on. Why would you? Peak rates are only 21 cents / kwh so you make the most cash with 100% sales). In my state, NY, you can either have Net Metering or Batteries, but by law they are mutually exclusive. But, its not a problem since you get Net Metering for (almost) free, so why buy the batteries? I pay $15.67 for my electric bill every month, but even if I did absolutely nothing and had zero usage, my bill would be $18.60 including tax. So that’s why I say its ‘free’, (better than free?) since I would have to pay the $18.60 minimum charge/billing charge/meter reading charge anyway. Going totally off-grid would therefore ‘save’ me less than… Read more »
This is a good point Bill, and I think plays well in almost any region for today. Grid-tie if available is the right play looking short-term. However, as more solar (and storage) comes online, it causes great stress on the utility’s financial infrastructure, so any longer term math on ‘cost of battery ownership’ can’t be a straight line assumption. Your savings today on grid tie is likely to be the best you will ever achieve. One only needs to look at Hawaii to see what surging solar has quickly done to electricity prices, and the difficulty of connecting/selling power back to the grid caused by the wave of residential PV owners. ~40+ cents cost per kWh/min fees/hook-up issues, etc. With increasing levels/fear of PV adoption “grid-tie” isn’t even allowed in some places. Being a part-time Ontario resident, and once PV owner I will give you an example of change in the once “greatest solar incentive location in the world”. The solar buy-back rate used to be 82 cents per kWh on a long-term Microfit program, while the blended cost of power was just over 5 cents per kWh (pre-fees – which almost doubled it). That’s a spread of 77 cents,… Read more »
Bill Howland
Hehe yeah, there’s one Utility executive at the club meeting who dislikes talking to me since he claims the typical 300% rate rise in recent years is totally justifiable, being required since rural customers are ‘so hard’ to supply. Ontario now has 100% smart meters and mandated Time-of-use, neither of which I suffer from in BUffalo. Other people I’ve mentioned in the past suspect part of the problem with the astromomic rate increase has been the, in my view, mistaken bonanza given to solar home owners, but mainly due to Ontario’s heavy reliance on Nuclear Power, which is extremely expensive – seeing as they’ve shuttered 100% of their low-cost Coal fired power plants. I’m not starting an argument on that Issue I’m just stating what they have done. The other ‘cost’ mentioned is that in Rural areas, they are putting in mostly a transformer per house. That’s dumb even there. When I was a kid, my folks had a summer home near Fort Erie, which was ‘powered’ by American owned Canadian Niagara Electric. It was somewhat rural, but they had 1 – 10 kva transformer for 2 full blocks of homes – around 18 in all. And 25 kva for… Read more »
Peder

Bill,
Same experience in California. In most of the California utilities including SDG&E, batteries can only be used as an emergency power supply in case of a blackout if connected to the grid.

Hopefully that will change as I suspect the utilities will begin to push their peak hour pricing to 9pm. If this happens it would be great to use the energy in a battery before going out to the grid.

A lot needs to change in the utility regulatory rules.

Speculawyer

Does it make sense? Well it really depends on where you live. It depends on the availability of net-metering, the type of net-metering, the local cost of electricity, if time-of-use rates are available, what your solar resources are, etc.

For Peder and I . . . it is probably not worth it because we have very nice net-metering programs. But for someone in Australia with really high electricity rates, no net-metering or a terrible net-metering program, and a lot of sun . . . yes, it makes sense.

Speculawyer

BTW, the important part of the Tesla storage announcement was not the Powerwall, it was the utility/commercial storage system that can be used for grid storage and for reducing ‘demand charges’. That is the part that will sell big now.

For now, the Powerwall can sell in Germany and Australia. And it can sell to off-grid cabins and rich people that don’t want to miss a second of electricity in the USA>

Open-Mind

IMO, the reduced electric bill is just part of the equation.

I think the cost value analysis of these home battery systems should also include their potential to also provide emergency backup-power, and serve as an in-home super chargers. These new products will be valuable to some, but are not yet readily available. Just like that $10K cell phone.

Lensman
Thanks to everyone, especially Bill Howland and Jay Cole, for the detailed real-world cost/benefit analyses here. This is exactly the sort of discussion we need to point up the realities and practicality (or lack thereof, depending) of home use of solar power and/or battery pack for energy storage, as well as the wide differences in the cost/benefit ratio in different regions. One thing which hasn’t been touched on is what will happen when the utilities start installing their own large-scale energy storage systems. As electric utilities get their own storage, they will become less sensitive to power surges from “too much” solar power being fed into the grid, so resistance to (and fees for) home owners hooking up a solar power system to the grid should become less. On the other hand, if and when the utilities have enough storage capacity for several hours, then they can use their excess night-time production to offset the peak daytime demand, and their need to pay anyone peak power rates for power fed into the grid during those hours will be lessened. As a result, the price the utilities pay home owners for power during peak periods should fall from retail to wholesale… Read more »
Speculawyer
Lensman

Hey, thanks Speculawyer! That Forbes article, your second link, is a great read, with much food for thought. I hope he’s right!

ModernMarvelFan

The conclusion is that it doesn’t make financial sense but makes “bragging” sense.

Just what we thought. LOL.

Steven

What about “unintentional off grid living” like in a power outage?