The Tesla Powerwall and the Economics of Residential Backup Battery Power

DC-Solar-Electric-Dont-Believe-The-Hype-Tesla-ImageThe first week of May 2015, Elon Musk announced the formation of Tesla Energy coinciding with the release of the Tesla Powerwall.

Here’s my perspective on the Tesla Powerwall and my qualifications for voicing it

I’m a solar professional working in California for over 7 years in the industry with an engineering background from MIT.

Having designed and sold over 250 grid-tied solar electric systems, less than five of my clients wanted battery backup when they eventually considered the financial and efficiency costs involved in adding this component to their solar electric system.

A few of my clients have Tesla Electric vehicles. For them, it is likely they can afford and might enjoy the cachet of having a Tesla Powerwall.

For the rest of us, this technology is not a game changer, and it will not motivate me to purchase a battery bank. It is however a bold step in the right direction.

Tesla is playing off the rebellious American teen spirit which wants to stick it to the Man and flaunt our independence from the big bad grid. I’d rather have the grid than a battery bank any day, even if it’s a shiny new sleek white bull branded by Tesla.

The design of the powerwall, while attractive, is also potentially problematic. If you read the specs, what small crew of installers without a hankering for a hernia would want to hang 220 lbs on a wall?

It’s also undersized. Thirty kilowatt-hours (kWh) is about the daily electrical consumption of the average American home. So, the Tesla powerwall’s largest 10kWh battery bank outputting 2kW of continuous power is definitely battery LITE. Yes, you can parallel the powerwalls by spending multiples of $3500, to increase capacity and yes, that’s getting increasingly spendy.

You can’t just have a battery bank. You also need a solar inverter that will both charge a battery bank and interface with the grid. It remains to be seen how Tesla will handle the DC interface needed to safely charge the powerwall from a solar inverter.

While I admire Elon Musk for his visionary hubris and the balls to go out and build a gigafactory, most of us do not need or want battery banks in the house. The only battery bank I want will be on four wheels, in an electric car.

With grid-tied solar electric, the grid is effectively a Gigantic! battery bank. It’s called net metering. Net metering allows you to push power into the grid during the day and pull power from your utility at night while getting credited for the full retail value of your solar.

Current net metering law in CA puts the cost of utilizing the grid as such at about $5/month for residential customers. There was some scuffle last year in the fallout related to California’s AB327 that indicated the administrative price of being net metered with PG&E would go up to $10/month this year and $15/month next year but we haven’t seen it yet. Even at $15/month, net metering is way cheaper and way more efficient than incurring the 8% energy conversion efficiency loss or expense of the Tesla powerwall.

Bottom line, if your utility grid power is reliable, use the grid as your battery since retail cost offset net-metering is available. If you’re already net-metered or plan to go solar before July 2017, you’re guaranteed full retail cost offset under the current net metering contract in California for 20 years. If you haven’t gone solar before mid-2017, you will be subject to the currently under-negotiation new net metering contract, which at this point does Not guarantee full retail cost offset for renewable energy.

Avoid Paying Peak Rates Power companies often charge a higher price for electricity during peak evening hours than overnight when demand is low. Powerwall can reduce your power bill by storing electricity when rates are low and powering your home when rates are high.

This is Tesla’s suggestion about load shifiting related to time-of-use electric rates and saving money by pumping power into the battery bank off peak and pulling it out at peak rates. He’s overstating the usefulness of the powerwall. It doesn’t pencil out in this case. It smells like the folks over in Fremont have been huffing Detroit’s automobile fumes and are puffing out balloons filled with hot air.

Let’s do the math. PG&E’s tier 1 standard residential rate is currently 17 cents/kWh. Summer peak tier 1 is 32 cents/kWh. That 15 cents differential optimistically applied every day to 10kWh of battery capacity lends $1.50 day. Factor in the 92% cycle efficiency of the battery and you’re at $1.38.

Payback time on an estimated $5k total install price of the 10kWh powerwall ends up at 10 years. This is the absolute best case scenario, IF you could get 10kWh out of the powerwall every day which you can’t. Let’s say you cycle that 10kWh powerwall every three days. Now you’re at 30 years. Most residential solar arrays pay back well before 10 years.

Also, the reality is that except in bad weather, an appropriately sized solar array is already not only supplying the entire home’s electrical needs during peak power times but also pumping excess power into the grid in the summer. We solar folks figured out a long time ago that a solar electric system alone usually has significantly more value when paired with a time-of-use rate schedule.

Common industry practice, in fact, is to try to site the solar array so that it produces more during peak summer afternoon hours, angling it toward the west if possible. This benefits not only the homeowner, but the grid as well, reducing the need for expensive “peaker” power plants to offset peak energy demand by supplanting the grid power with renewable energy.

The well understood equation with solar in relation to time of use rates is basically just sell high, buy low. Push power into the grid at high rates on summer afternoons during peak, pull it back out again at night, on weekends, and in the winter at off-peak lower rates. This allows us to typically size a system at about 90% of what would be required to offset the entire household kWh loads, and still get rid of the power bill. Once again, the grid is already supplying the function of the powerwall, less expensively and more efficiently.

Almost all of the people I talk to who do need backup power for their homes go out and get a generator. The powerwall will slightly lower the cost of battery power in the foreseeable future. Hooray for that! And it’s a slick package… and yes, we’d like to see technology get to the point where the choice is clearly a battery bank or ceramic fuel cell stack instead of a noisy generator puffing out noxious fumes.

In our rural Nevada County in California, we have the highest solar density per household in the state and California has about 2/3 of the Nation’s installed solar.

The demographics here are skewed by the amount of off-grid systems. For those of us that would have to pay $50k just to get a power pole, transformer and electric meter to the house, then yes, everything that can be done to advance the state of the art of battery technology is helpful.

It is true, as Elon Musk has envisioned, that we could eventually wean ourselves off fossil fuel as a society and become completely sustainable with a solar-wind power mix stabilized by millions of big battery banks. That is a long-term idealistic goal however. The current reality is that even in California, less than 5% of the retail utility ratepayers are net-metered. We have a long way to go to get to a sustainable future and the near term renewable utility power mix will be an increasingly prevalent combination of wind, solar and hydro-power (despite the drought in the west right now).

For large utility-scale energy storage solutions, there are lots of technologies being explored such as flywheels, heat-storage in salt, elevated water etc. Tesla’s improved battery technology is just one of those potential solutions.

Just like Musk has done with Solar City, putting his name on battery technology with the powerwall and applying his million dollar marketing budget to it will help commoditize the technology and allow the rest of the industry to step in and be professional about it after the dust has settled from the tremendous hype generated by Tesla.

Again, however, the bottom line is that most of us don’t need or want a battery bank in the garage or on the outside of the house, even if it has Tesla’s name on it and hangs on the wall like a shrine to technological progress. It just doesn’t make cents (sense) because net metering is such a better deal and the grid is so reliable. Put those batteries in electric cars and keep improving that technology. That’s a much bigger priority in my mind. If the side effect is better more affordable residential battery power for those who actually need it, then that’s a bonus.