Is the Tesla Powerwall now a stable and viable solution for American homeowners?
Published on 31 May, 2017 by Harvey Petersen
Off the bat... let me say I love the Tesla company. American engineering, American manufacturing jobs, smart technology and a drive to do good in the world.
They provide renewable solutions and alternatives in the form of:
- clean power generation (solar roof tiles and their SolarCity retail solar power solutions)
- power storage (the Powerwall battery)
- transportation (the iconic Tesla electric car)
However, this articles aims to answer one question only, do we think an average American homeowner is making a sensible economic decision buying a Tesla Powerwall battery power storage solution for their home.
If you forget for a moment the existence of net metering laws (which economically does the same thing as battery storage does physically) the major issue with solar is that the sun doesn't shine at night. Solar panels generate all their power during the day. This means that at night, when you really need it, you can't use the power that was generated during the day.
Battery storage is a way of turning an inherently intermittent power source such as solar power into a stable power source that can be used at any time to meet the electrical loads of a house or business.
Battery storage is not a new concept; batteries have been used in off-grid systems for many years, and in many other electrical applications.
There are many different types of batteries in the market today, ranging from lead acid to lithium-ion.
What Tesla have tried to do with the Powerwall is to make battery storage an accessible option for the mass market both in terms of price and also in terms of the physical size and maintenance requirements to own a battery storage solution.
The Tesla Powerwall was first announced in April 2015. At the time of this announcement it was said that the first model would have a peak power output of 3.3 kw and a usable capacity of 6.4kwh of power. However, what captured the attention of everyone was that they announced the cost would only be $3,500. This was a sticker price a fraction of what battery storage solutions were being offered for (and still are being offered for)
To say that this announcement was big on rhetoric and buzz words and short on detail is an understatement.
The very few electrical engineers that write on the solar industry pointed out that many technical issues that are inherent in offering this type of solution had been glossed over. Tesla were clever in giving these guys little ammunition because they didn't release a technical specification for the product for a long time making it harder for the few industry players that knew enough about electronics to point out why the solution would not work, to explain articulately the shortcomings.
The Tesla Powerwall
The first Tesla Powerwall was mooted to be a DC coupled battery solution but there was little detail of how the battery charger for the Powerwall would co-ordinate its operation with grid connect inverters that were not designed to take external direction about how they operate from a battery charger.
However, the vast throng of uneducated journalists that know little about electronics jumped on this band wagon and Tesla got millions of dollars worth of free media and publicity. Well played Mr Musk. Meanwhile punters started turning up to their local solar company and asking for an all-encompassing battery storage solution for $3,500.
In late 2015 Tesla did release a detailed technical specification for their Powerwall and sales started sometime around this point.
In October 2016, the Powerwall 2.0 was released.
It features a peak power output and usable energy more than double the original at 7kw and 13.5 kwh respectively, and includes a 10-year warranty.
The price has also been upgraded from $3,500 to $5,500, plus another $700 for supporting hardware. Tesla estimates the installation cost you should pay an installer is between $800 to $2,000. If this is correct, the total cost of the Powerwall 2.0 is around $7,000-$8,200.
For simplicity, let's say $7,500 for a fully installed Powerwall 2.0. For that extra cash, you also get an in-built inverter, which was not included in the first Powerwall. This inverter would typically set buyers back around $2,000. With all this considered, the Powerwall 2.0 is a lot cheaper than first thought.
In an average American household
According to this report from the University of Stanford, the average American household can break even by purchasing the Tesla Powerall 2.0.
The report claims this is true if the household is on a Time of Use plan for their electric, and pays more than $0.139 per kw/h. Therefore, if you pay less than $0.139 per kw/h, expect a payback period longer than the warranty of the Powerwall. Keep in mind that this report is based on the average American family, and the actual payback period will differ from one household to another.
However, this report does not acknowledge the fact that almost all Americans that live in a state where power prices are over $0.139 also live in a state where there is a net metering law.
Batteries are not the only way to solve the issue of not being able to use solar power generated during the day. In more than 30 states, Net Metering exists. This legislation means that utilities give the consumer 1:1 credits for the power that they export back to the grid. This is effectively an unlimited battery. This eliminates the need for battery storage in your home, if you live in a state where Net Metering exists. Visit the Solar Estimate Solar Incentives page to find out if Net Metering exists in your state.
If you don't live in a state that has a Net Metering law, then you may want to consider a battery for storing your power.
Of course if you want to go off-grid, the battery storage is not an option it is a must have and so it will be interesting to see how the Powerwall and other Lithium Ion battery solutions change the economics of off grid living.
The only downside to off-grid is the cost
You'll need to pay for the solar system, and then a battery backup on top of that. Also, the warranty for the Powerwall is only 10 years, and solar panels warranty is 25 years, so before you by new panels you may have to fork out another $5,500 for a second Powerwall. The Powerwall's efficiency is expected to drop to 70% after 10 years.
The Powerwall is not unlike a mobile phone in this way. When you first buy it, it lasts for the whole day. But, after a few years, it will struggle to last the entire day. Phone batteries are made from the same lithium-ion technology as the Tesla Powerwall, so you can expect the same decay to happen over time.
In the next few years, we will see a dramatic increase in the number of electric cars being produced. Therefore, energy storage technology is set to increase, which will drive longer-lasting, higher output batteries in the home energy storage market. Tesla invests millions in the battery technology for their cars and it is likely they will continue to improve over time (as seen in the difference between the first Powerwall and the Powerwall 2.0).
The bottom line
The bottom line is that the first Tesla Powerwall was expensive and didn't store much power. The second release was twice as good in terms of power storage, and included an inverter. This is a huge increase in power and usability from one generation to the next.
However, it does not change one simple fact; Why would you pay for a battery storage solution when you can get a 15 or 20 year net metering agreement with your utility company that effectively gives you full retail value of all the solar power you generate regardless of the fact that the timing of your generation and power usage don't match.
Economically, the net metering law does the same as the Powerwall does for you without you making any investment. So if you live in one of the 30 states with net metering and are connected to a public power grid then a Powerwall is not an economically viable solution.
In this case our advice is to simply get a grid connect solar system installed and sign a 15 year net metering agreement with your utility while the 30% federal solar tax credit and the net metering law still exist. These are both generous subsidies that won't be around forever. See the best cost for grid connect solar systems in your city.
However, if you have your heart set on a Powerwall, wait until the third or even fourth generation comes along. By then, it is highly likely that the Tesla Powerwall will be a more mature solution offering better value and a more proven operating history.