The Great Disrupter? TRYING TO MAKE ECONOMIC SENSE OF TESLA'S BATTERY

July 21, 2015 Darrell Delamaide

UTILITIES MAY NEVER be the same in the wake of Tesla's announcement in late April that it will be offering a 220-pound battery pack for home use to store solar power, but it won't be because of Tesla's batteries.
That didn't stop Tesla's Elon Musk from claiming as he unveiled the company's sleek Powerwall that he was announcing "a fundamental transformation of how the world works."
The rechargeable lithium-ion battery pack --- designed to hang on a garage wall and store solar energy --- was a testament to Musk's gift for showmanship, but hardly a revolution that will entice the masses.
"It is symptomatic of a broader transition," says Jesse Morris, a manager in the electricity practice at the Rocky Mountain Institute, a nonprofit consulting firm that focuses on renewable energy. "What we are seeing in general is the upending of an electrical power system from a centrally planned regime to a customer-focused service."
No doubt. But Tesla isn't alone in ramping up production of battery packs. For example, Kyocera Corp., a Japanese electronics manufacturer, sells home energy-storage systems in Japan and Germany using Samsung lithium-ion batteries. The company plans to soon unveil a larger battery system, capable of storing 12 kilowatt-hours of energy, in Japan.
Admittedly, Tesla's announcement created a splash because the sticker price for the Powerwall --- at $3,000 to $3,500 --- is much lower than existing batteries. "It was a price that came much sooner than anyone expected," says Morris.
Demand for Tesla's home batteries --- 38,000 queries in the first week --- generated plenty of buzz. But, of course, it would take millions of batteries to store and deliver the power generated from a single fossil fuel power plant.
Also, battery prices are still too high for most Americans and are likely to remain a curio for the rich for a long time to come.
Underscoring that point, an analysis by Bloomberg New Energy Finance concluded the cost to the average U.S. homeowner hoping to rely solely on solar panels and Tesla's new batteries would be roughly $98,000, far beyond the reach of most.
That's why rather than a revolution, the arrival of an affordable energy storage package for home use --- whether Tesla's or someone else's --- is simply part of the evolution toward a mix of grid and distributed resources, renewable and traditional sources of energy that utilities have been dealing with for some time.
"A strong, robust grid enables a wide array of new technologies and innovations, including energy efficiency, electric vehicles, microgrids and energy storage," notes David Owens, executive vice president of business operations at Edison Electric Institute.
"Electric utilities are continuing to actively partner with a variety of technology partners on a number of emerging innovations, including storage at the distribution and grid levels."
Indeed, they are and the point, really, is that little of what's happening at Tesla Energy should be seen as a threat rather than an opportunity.
Smart utilities, whether prodded by regulators or simply acting in their own best interests, have been making the transition toward a more diversified customer- service model for years, using smart meters, microgrids and distributed resource platforms.
"Tesla is making the challenge more immediate with a cheaper battery," says Morris. "It can be good or bad for utilities, depending on if they look at it as a threat." But, again, just how cheap the Tesla battery will be, or how useful, remains unclear.
Analysts were quick to point out that the Tesla products --- a 7kWh battery for daily use or a 10kWh battery as a backup for loss of grid power --- were hardly adequate for most home needs. The batteries can be stacked to scale up capacity, but then the price goes up fast.
Moreover, the battery sticker price represents only part of the picture, with an inverter and installation adding significantly to the overall cost.
Analysts also were quick to point out that using batteries in the home makes little sense in places where net-metering obliges the utility to buy excess power, since grid power is still much cheaper than self-generated and stored power.
But battery costs and their cost per kilowatt- hour will go down over time.
Morris, for one, thinks utilities should take the lead and actually pay customers to install the batteries in their homes and make up their cost through the demand-management efficiencies the batteries enable.
Tesla is also offering a 100kWh Powerpack to utilities to store energy from renewable sources, which is also scalable.
"Storage can take place in many places," says RMI's Morris, "at the wind turbine, at the substation or with the customer."
For utilities, co-opting energy storage can be a way to meet their own mandates for renewable energy sourcing, while helping them defer costly grid upgrades.
Tesla, as Morris notes, "has shown a knack for design and reliability," but no matter how many batteries it or its competitors sell, "somebody's got to keep the lights on," he says.
BNEF analyst Nathaniel Bullard may have put it best: "The Powerwall is not a system, or a configuration, or a storage solution.
It is a product. Named, recognizable, iconic, attractive, desirable, and unnecessary."

 

UTILITIES MAY NEVER be the same in the wake of Tesla's announcement in late April that it will be offering a 220-pound battery pack for home use to store solar power, but it won't be because of Tesla's batteries.

That didn't stop Tesla's Elon Musk from claiming as he unveiled the company's sleek Powerwall that he was announcing "a fundamental transformation of how the world works."

The rechargeable lithium-ion battery pack --- designed to hang on a garage wall and store solar energy --- was a testament to Musk's gift for showmanship, but hardly a revolution that will entice the masses.

"It is symptomatic of a broader transition," says Jesse Morris, a manager in the electricity practice at the Rocky Mountain Institute, a nonprofit consulting firm that focuses on renewable energy. "What we are seeing in general is the upending of an electrical power system from a centrally planned regime to a customer-focused service."

No doubt. But Tesla isn't alone in ramping up production of battery packs. For example, Kyocera Corp., a Japanese electronics manufacturer, sells home energy-storage systems in Japan and Germany using Samsung lithium-ion batteries. The company plans to soon unveil a larger battery system, capable of storing 12 kilowatt-hours of energy, in Japan.

Admittedly, Tesla's announcement created a splash because the sticker price for the Powerwall --- at $3,000 to $3,500 --- is much lower than existing batteries. "It was a price that came much sooner than anyone expected," says Morris.

Demand for Tesla's home batteries --- 38,000 queries in the first week --- generated plenty of buzz. But, of course, it would take millions of batteries to store and deliver the power generated from a single fossil fuel power plant.

Also, battery prices are still too high for most Americans and are likely to remain a curio for the rich for a long time to come.

Underscoring that point, an analysis by Bloomberg New Energy Finance concluded the cost to the average U.S. homeowner hoping to rely solely on solar panels and Tesla's new batteries would be roughly $98,000, far beyond the reach of most.

That's why rather than a revolution, the arrival of an affordable energy storage package for home use --- whether Tesla's or someone else's --- is simply part of the evolution toward a mix of grid and distributed resources, renewable and traditional sources of energy that utilities have been dealing with for some time.

"A strong, robust grid enables a wide array of new technologies and innovations, including energy efficiency, electric vehicles, microgrids and energy storage," notes David Owens, executive vice president of business operations at Edison Electric Institute.

"Electric utilities are continuing to actively partner with a variety of technology partners on a number of emerging innovations, including storage at the distribution and grid levels."

Indeed, they are and the point, really, is that little of what's happening at Tesla Energy should be seen as a threat rather than an opportunity.

Smart utilities, whether prodded by regulators or simply acting in their own best interests, have been making the transition toward a more diversified customer- service model for years, using smart meters, microgrids and distributed resource platforms.

"Tesla is making the challenge more immediate with a cheaper battery," says Morris. "It can be good or bad for utilities, depending on if they look at it as a threat." But, again, just how cheap the Tesla battery will be, or how useful, remains unclear.

Analysts were quick to point out that the Tesla products --- a 7kWh battery for daily use or a 10kWh battery as a backup for loss of grid power --- were hardly adequate for most home needs. The batteries can be stacked to scale up capacity, but then the price goes up fast.

Moreover, the battery sticker price represents only part of the picture, with an inverter and installation adding significantly to the overall cost.

Analysts also were quick to point out that using batteries in the home makes little sense in places where net-metering obliges the utility to buy excess power, since grid power is still much cheaper than self-generated and stored power.

But battery costs and their cost per kilowatt- hour will go down over time.

Morris, for one, thinks utilities should take the lead and actually pay customers to install the batteries in their homes and make up their cost through the demand-management efficiencies the batteries enable.

Tesla is also offering a 100kWh Powerpack to utilities to store energy from renewable sources, which is also scalable.

"Storage can take place in many places," says RMI's Morris, "at the wind turbine, at the substation or with the customer."

For utilities, co-opting energy storage can be a way to meet their own mandates for renewable energy sourcing, while helping them defer costly grid upgrades.

Tesla, as Morris notes, "has shown a knack for design and reliability," but no matter how many batteries it or its competitors sell, "somebody's got to keep the lights on," he says.

BNEF analyst Nathaniel Bullard may have put it best: "The Powerwall is not a system, or a configuration, or a storage solution.

It is a product. Named, recognizable, iconic, attractive, desirable, and unnecessary."

 

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