The Tesla Powerwall – Renewable Journal for 5/1/2015

Three ways that the Tesla Powerwall might be a big deal – load shifting, battery backup, and solar storage.

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I’ve been reading about Elon Musk’s newest introduction into the world of renewable technologies – the Tesla Powerwall. Here’s the basics – for $3500 you get a 10 kWh battery for your home that mounts to your wall. There’s a 7 kWh version for $3000, and installation costs extra. And if you’ve got a home or business that consumes lots of electricity, you can mount several of these units in parallel to get even more battery storage.

At this point I see a few different ways that this could be a big deal.

Load shifting

Electricity costs more during the day, especially during the summer when AC is running. This is basic supply and demand – when utilities need to provide more electricity, they charge more for it. Since most utilities are monopolies, there are regulatory limits on how much they can increase their rates, but they’re always allowed to increase them some. And frankly, that’s not necessarily a bad thing because higher electricity costs promotes using electricity more efficiently and using it off-peak times when possible.

Load shifting is the practice of doing electricity-intensive actions at night or early in the morning, before peak electricity hours in the afternoon and early evening, when the electricity is cheaper. Businesses do this regularly with their HVAC systems, freezing massive tubs of water over night when the electricity is cheap and then turning off the freezer during the day and using the melting ice to cool the air instead of using refrigeration coils all the time.

In the case of a battery system like the Powerwall, it could be configured to charge up overnight and then discharge during the day when the household’s electricity usage goes up. Battery systems for businesses and homes have been available for decades, but they’ve been expensive to buy, physically large, and hard to maintain.

What makes the Powerwall potentially disruptive is that it’s physically small and cheap. Looking at the EIA, there are parts of the country (New England, for example), where there can be a 10 cent per kWh or more difference between off-peak and peak electricity rates. If a home in New England consumes 20 kWh per day, 10 kWh of which is on-peak, then using a 10 kWh Powerwall could save a dollar per day. That’s a payback period of about 9.5 years at today’s electricity rates. The bigger the difference between on and off-peak electricity rates, the faster the payback.

That said, however, it’s also a much longer payback period than most businesses expect and most homeowners can afford. Homeowners tend to move more often than once every 10 years, and most businessmen I’ve talked over the years seem to expect a capital expense to pay for itself within 3-5 years. So I don’t think that load shifting alone is a good enough reason for one of these.

Backup power

If you’ve ever been playing a game or working on your computer when the power died, you know the anguish of losing all your work since your last backup. A home or business battery backup like the Powerwall would keep the electricity flowing in cases where the power goes out. Again, there are already many options for doing this (just search BestBuy or Amazon for “battery backup system” and you’ll see lots of examples ranging in price from $50 to $350 each), but given the low price of the Powerwall, it may well be cheaper to buy one centralized Powerwall than a bunch of backups for each individual computer.

I think that the economics of buying a Powerwall for emergency backup makes more sense than buying one for load shifting, at least until such time as the prices come down even further.

Solar storage

I have a leased SolarCity system on my home. I use net metering and I pay a connection fee to my utility to provide electricity when my solar panels are not operating due to weather or darkness. But it’s possible that adding a Powerwall to my home could make me almost completely independent of my utility. By storing electricity I’d make fewer credits, but in the summer months it’s entirely possible that I’d not use my utility’s electricity at all because the battery would pick up the slack.

That said, I wouldn’t do battery system until I had at least a full year’s worth of data – preferable more – because it’s also possible that the net metering would save me more in the winter than the battery could save me in the summer. It’s the kind of purchase that would have to be looked at very carefully to make sure that it made sense financially.

For people who live in rural areas, however, a battery backup like the Powerwall might make a lot more sense. It costs a lot of money to electrify rural homes, and they’re a lot more susceptible to outages than urban and suburban homes are. The Powerwall has the potential to make a combined solar plus battery system cheap and reliable enough to enable rural homeowners to go off-grid entirely while still maintaining their technological connections to the modern word (cell phone, internet, satellite TV, et al).

I wouldn’t be surprised to see a solar panel/Powerwall bundle available from SolarCity soon. Heck, I’d be surprised if we didn’t see a bundle soon.

In one sense the Powerwall is nothing special. Battery backups are already available for businesses, for homes, and for individual electronic devices. But the Powerwall is both small and cheap, and that may make all the difference.

1 reply »

  1. You needn’t just look at this just in terms of payback time. If a Powerwall gives you a dollar a day in savings, that’s about a 10% rate of return. Compare that to buying a government bond or putting the money in a savings account. Furthermore, the money you save on electricity is income-tax free, unlike interest income.

    For people looking for somewhere to invest some cash to earn income, this option compares quite nicely.

    And, as you say, there are additional benefits from having a household-level uninterruptible power supply.