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Why Tesla’s Powerwall Is Just Another Toy For Rich Green People

May 21, 2015

By Paul Homewood 

 

 Musk with utility-scale “Powerpack.” (Photo by Kevork Djansezian/Getty Images)

 

You may have heard about Elon Musk’s plans to save us all from climate apocalypse by selling us all Tesla batteries, so that we can store electricity from wonderful solar panels.

A couple of articles which go into the economic detail and find that the idea just does not stack up.

It sounds like an attempt to offset the losses from their core auto business.

 

Why Tesla’s Powerwall Is Just Another Toy For Rich Green People

 

All the breathless coverage of Elon Musk’s Powerwall battery brouhaha last night is missing the most important thing: a sober discussion of real-world costs. So let’s take a look at the costs and see if this world-shaking, game-changing innovation really makes any sense.

Musk said Tesla’s 7 kwh capacity battery would cost $3,000, while the 10 kwh capacity one would be $3,500. (That doesn’t include the cost of a DC-AC inverter – about $4,000 $2,000–  plus professional installation.)

The implication is that a 10 kwh system could supply 1,000 watts of current to your home for 10 hours. That’s a good amount of energy. The average American home draws an average of 1,200 watts of power around-the-clock, according to the U.S. Department of Energy. For a sense of scale, a desktop computer draws about 100 watts, a big TV 200 watts. Refrigerators cycle on and off, but average about 100 watts.

So how much is that battery power going to cost?  Setting aside for a moment the cost of making that electricity in the first place, let’s look at just the cost of using the battery to store it and get it out again. Researcher Winfried Hoffman, the former CTO of Applied Materials AMAT -0.99%, has done some interesting work on the falling costs of battery power. He figures that for a lithium-ion system with an initial installation cost of $400 per kwh capacity, 80% efficiency and ability to run 5,000 cycles, the average cost of stored electricity will be 15 cents per kwh.

 Musk with utility-scale “Powerpack.” (Photo by Kevork Djansezian/Getty Images)

 

This might be conservative. Solar installer Sungevity is working with a German battery company called Sonnenbattery, which claims it can do 10,000 cycles.

But this calculation might also not be conservative enough. It’s unclear how many cycles you could expect to get out of Powerwall. Tesla says its 7 kwh Powerwall can cycle daily, while the 10 kwh system would cycle weekly. The cost of the battery is amortized over the total amount of electricity cycled through it over its lifetime. The less you use it, the higher your average unit cost.

Either way, 15 cents per kwh for battery storage seems ball-park reasonable.

To get your real electricity cost, you have to add to that 15 cent battery charge whatever you’re paying for that electricity in the first place. Since the idea is that batteries will work in tandem with solar, we’ll look at what Tesla’s sister company SolarCity SCTY -1.33% charges its customers. According to SolarCity, a customer pays no upfront costs for a system, but then gets dinged for 15 cents per kwh of power generated. In the contract, SolarCity has the ability to increase that rate 2.9% a year, which doesn’t seem like much, but would end up raising your cost per kwh above 20 cents by the end of the 20 year term. So adding together your 15 cents per kwh for solar power plus the 15 cents to cycle a kwh in and out of the battery, and you’re looking at 30 cents per kwh for electricity.

I think 30 cents per kwh is bonkers. At my home in Texas I pay 10 cents per kwh to Reliant Energy for electricity that is mostly generated by natural gas burning power plants. Nationwide , the average retail electricity price is 12.5 cents per kWh, according to the Dept. of Energy. Now I understand that power prices are considerably higher in California and Hawaii and other parts of the world with shoddy power grids, but in the vast majority of the United States no one pays anything close to 30 cents per kWh for electricity.

But it gets worse. Let’s think some more about the real utility of this Powerwall system. According to the Dept. of Energy, the average home uses 10,900 kWh per year, which equates to about 900 kWh per month or an average round-the-clock power demand of 1,200 watts. Now with some attention to efficiency, the average home could probably get itself down to 1,000 watts of power demand on average, which would probably be low enough that Tesla’s 10 kwh Powerwall battery could handle the loads for about half the day.

The idea of course is that the solar panels on a 100% solar home would power the house during the day while simultaneously charging the Powerwall batteries, which would keep the power going at night.

And here’s where the economics of the Powerwall break down. If you do not have a big enough solar system to get your home entirely off the grid, then there is simply no point whatsoever in paying 30 cents per kwh to get electricity via the Powerwall. At night, when you’re not generating solar power, you could simply get your electricity from the grid. For an average 12.5 cents a kwh.

I’ll say it another way: unless your solar-powered home is entirely disconnected from the grid, or your solar system is big enough to provide for all your electricity needs, an expensive battery backup system like Powerwall does not make economic sense.

No doubt battery technology is important for the management of the power grid of the future, but at this time the average homeowner should let the big power generation utilities take the risks and bear the costs of perfecting the technology. After all, any truly viable energy source is more economic when deployed on a large scale than on a small scale. Along with the Powerwall, Musk last night unveiled the utility-scale Powerpack that could deliver 100 kwh. No price for that one yet. Whether Tesla can sell these will be the real test.

http://www.forbes.com/sites/christopherhelman/2015/05/01/why-teslas-powerwall-is-just-another-toy-for-rich-green-people/

 

 

The Silliness Of Tesla’s 10kWh Back-Up Battery

Summary

  • Last week, Tesla introduced a 10kWh home battery pack for back-up use only.
  • It will cost $7140 installed, will be dead in fewer than five hours, and can’t run an entire house or central air conditioning or charge an electric car.
  • Meanwhile, for the same price, a natural gas back-up generator can run all your appliances for as long as the power is out.
  • Thus, for anyone with access to natural gas, there’s no rational reason to buy the Tesla back-up battery.

In an effort to distract investors from its cash-burning car business, as well as to find some use for millions of Panasonic cells that it has committed to buy without being able to sell enough cars to utilize them, Tesla Motors (NASDAQ:TSLA) last week introduced a 10kWh home battery pack meant only for emergency back-up power. (It also introduced a 7kWh pack meant for regular use that also makes no economic or utilization sense, but that can be a subject of a different article.)

Tesla is pricing this back-up battery at $3500 before installation costs, and Solar City (NASDAQ:SCTY) is offering an installed purchase price of $7140.

To put the inadequacy of this product into perspective, here’s a great summary of the power requirements of many household items. It’s pretty clear that without "going crazy", your house can easily draw 3kw of electricity; and yet, Tesla’s 10kWh back-up battery has continuous output of only 2kw, and thus is inadequate to run even a medium-sized house, and would be completely dead in five hours anyway, with no capacity to run central air conditioning or charge an electric car. (For a medium-sized house, a central air conditioner alone draws nearly 5kw.) Sure, to make that battery last longer than five hours, everyone could huddle into one broiling hot room and shut off everything but the refrigerator and a few light bulbs, but why would you do that when…

a comparably priced 16kw natural gas-fired generator can run your entire house (including the air-conditioning) for as many hours as needed, at a cost of less than $2/hour (assuming 195 cubic feet/hour consumption at full draw and a New York State gas price of less than $10 per 1000 cubic feet of gas)? (Okay, I concede that in a major earthquake, your gas service could suffer an outage, but for that situation, you can run a gas-fired generator off a propane tank.)

In other words, this new back-up battery from Tesla is just another attempted Musk distraction from a core auto business that I expect in this week’s Q1 earnings report will show record GAAP losses and the company’s lowest gross margin (ex-ZEV credits) in at least a year, as well as Q2 guidance that demonstrates that Tesla is impossibly behind on its goal of selling 55,000 cars this year.

http://seekingalpha.com/article/3132996-the-silliness-of-teslas-10kwh-back-up-battery

21 Comments
  1. May 21, 2015 4:49 pm

    Reblogged this on Tallbloke's Talkshop and commented:
    It’s more than a rumour that batteries degrade within ten years.

  2. sandyS permalink
    May 21, 2015 5:03 pm

    I grew up without electricity, in fact no mains services at all. The thought of intermittent or vulnerable electricity fills me with dread. Anyone in an area like Northern Europe/North America contemplating a solar based system should try living for a winter on a maximum of 1kw at anytime. If this proves impossible to cope with then stick to power from the grid.

  3. May 21, 2015 5:11 pm

    Reblogged this on Petrossa's Blog.

  4. saxonboy permalink
    May 21, 2015 6:13 pm

    Sounds like Tesla’s well on its way to becoming the next DeLorean ….here’s hoping.

  5. tom0mason permalink
    May 21, 2015 6:24 pm

    Elon Musk is primarily a salesman, not a scientist . As such his raison d’être is to identify a perceived gap in the market, and offer a product appearing to fill that requirement. To a large degree he has shown a good talent in that particular field.

    Working from the idea that Mr. Musk’s big battery will save the ‘renewable’ energy sector by smoothing out its production is a reasonable marketing ploy. But that is all it is — a marketing ploy. As those with high disposable incomes scramble to buy one, the reality is it is no more credible than his Telsa brand of electric vehicles being viable without a big government subsidy.

    I greatly admire Mr Musk for his real marketing skill. However this very expensive, and overall not particularly efficient method of storing a small amount of electrical energy, will only salve the guilt-ridden emotional need of the ‘technically stupid but rich’.
    Well done Mr. Musk you hit the very bull’s eye of your target audience again!

    Next-up the ‘technically stupid but rich’ to lobby for a big government subsidy for installing such devices?

    • tom0mason permalink
      May 22, 2015 12:51 am

      Correction Mr. Musk has a scientific past —

      Elon Musk was born and grew up in South Africa, buying his first computer at age 10. He taught himself how to program, and when he was 12 he made his first software sale—of a game he created called Blaster. At age 17, in 1989, he moved to Canada to attend Queen’s University, but he left in 1992 to study business and physics at the University of Pennsylvania. He graduated with an undergraduate degree in economics and stayed for a second bachelor’s degree in physics.

      After leaving Penn, Elon Musk headed to Stanford University in California to pursue a PhD in energy physics. However, his move was timed perfectly with the Internet boom, and he dropped out of Stanford after just two days to become a part of it, launching his first company, Zip2 Corporation.

      An online city guide, Zip2 was soon providing content for the new Web sites of both the New York Times and the Chicago Tribune, and in 1999, a division of Compaq Computer bought Zip2 for $307 million in cash and $34 million in stock options.

      He went on to more early success launching PayPal via a 2000 merger, Space Exploration Technologies Corp. (SpaceX) in 2002, and Tesla Motors in 2003. Musk made headlines in May 2012 when SpaceX launched a rocket that would send the first commercial vehicle to the International Space Station.

      http://www.biography.com/people/elon-musk-20837159?_escaped_fragment_=#!

  6. Stephen Lord permalink
    May 21, 2015 9:25 pm

    The marginal price for most people in California on tier 4 is 38c/kwh so 30c is not so bad.

  7. Kon Dealer permalink
    May 21, 2015 9:25 pm

    And just how long will the World’s lithium supplies last if Musk realises his wet dream?

  8. Deserttrek permalink
    May 21, 2015 9:49 pm

    california rates do vary , the investor owned are the worst and the public owned the best … time of use rates during peak seasons raise to over 30 in some areas, but, returning the cost on the batteries for a residential is iffy at best. the author is correct with utilities using batteries for system reliability, there are projects coming online in california to validate the technology and other systems have been in use for several years in remote areas for smoothing.

    musk is a salesman and when people fawn over him like apple products i say caveat emptor

  9. THX1138 permalink
    May 21, 2015 11:30 pm

    “A recently unearthed 2007 United States Geological Service survey appears to have discovered nearly $1 trillion in mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself.

    The previously unknown [that’s a lie, they knew all along during the invasion] deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world. An internal Pentagon memo, for example, states that Afghanistan could become the “Saudi Arabia of lithium,” a key raw material in the manufacture of batteries for laptops and BlackBerrys.”

    http://www.mining.com/1-trillion-motherlode-of-lithium-and-gold-discovered-in-afghanistan/

  10. RockySpears permalink
    May 22, 2015 10:38 am

    Why use Lithium at all? Vanadium batteries would appear an altogether better bet.

    http://www.bbc.co.uk/news/magazine-27829874

    • AndyG55 permalink
      May 22, 2015 11:19 am

      Obviously because they have stocks and contracts for lithium that they have not been able to sell in their cars.

      • RockySpears permalink
        May 22, 2015 11:40 am

        Apologies Andy, my question was rhetorical, only of use to link my sligtly Off Topic story.
        The world if just jammed full of people with “old stock” or “unshiftable stock”. I expect Mr. Musk to sell plenty of his gizmos, until the stock has gone. After that he will try and shift is DeLorean MkIIs, to collectors and mmuseums no doubt.

      • AndyG55 permalink
        May 22, 2015 12:39 pm

        So-kay.. I shoulda put a smilie. 🙂

        I just read that link of yours.

        Sulphuric acid , zinc, mercury.. what could possibly go wrong !

      • RockySpears permalink
        May 22, 2015 2:30 pm

        … and 1600kWhrs of energy(power) to boot!

    • May 25, 2015 8:34 pm

      Rocky I don’t know a lot about battery technology and you are welcome to correct me. At the bottom of the battery ladder sits good old lead-acid. It’s cheap, it supplies a lot of amps in a small form factor and will last for at least five years *provided* it is not deep-cycled. Deep cycling or discharge of a battery to near-empty kills lead-acid batteries.

      Li-ion batteries are hellish expensive but they are designed to be cycled right down to empty. The Vanadium battery is not at present transportable and it has a large form factor.

      So for the domestic user, I opine that Li-ion is not such a bad technology after all. Remembering of course that in all those Dreamliners that caught alight, it was the Li-ion battery that started it. I would think carefully before installing a big one on an interior wall in my house.

      I live in South Africa. Our electricity comes from a state-owned monopoly called Eskom that thanks to lack of generating capacity likes to switch the lights off for four to six hours at a time, a couple of times a week and getting more frequent as we enter the southern hemisphere winter. Households and businesses here need hefty storage devices and Li-ion is a candidate.

      The Powerwall is cute but it doesn’t deliver a lot of amps. You’d have to buy a whole nest of them just to run your home. Taking a Powerwall totally off-grid is nonsense. Each house would need solar panels the area of that famous solar road in the Netherlands and why not build the whole house out of Li-ion batteries, then you could call it the Powerhouse. (Original, huh?)

      But it could very well make good sense for South African domestic and business consumers to charge a Li-ion battery from the grid for use during one of our famous “load shedding” returns to the Dark Ages.

      Elon Musk could make good bucks here if he marketed a battery for this particular need.

  11. May 22, 2015 2:02 pm

    Thanks, Paul.
    Does it come in green?

  12. Mike Williams permalink
    May 22, 2015 2:53 pm

    The MSM largely fell for Musk’s propaganda without doing any searches for COTS alternatives e.g lead acid batteries — 1/3 the cost, safer, more recyclable (there’s a real world infrastructure that handles millions of them per year), more sources/options, and I understand that the ones used in golf carts perform better for longer. OK you can’t hang them on your garage wall but I would never put Li ion batteries inside/on my house anyhow.

  13. crosspatch permalink
    June 1, 2015 5:16 am

    I can think of a decent application for this that has nothing to do with solar or wind power. It might take two or three of these things to do properly, though. Imagine if your drain on the grid were steady all day and all night. Your surge loads would come from the storage. You now transform the household from a “demand load” to a “base load”. If you have an intelligent charging controller, sure, you can add your solar and wind to the system and it would back off the amount of power taken from the grid accordingly, but this allows an even more profound possibility.

    One of the problems with wind power is that there seems to often be an abundance of it when it isn’t needed. This results in the providers being cut off the grid else the grid could become unstable. What if the power provider could transmit down the power line, minute by minute, the price of electricity at that moment. As a surge of wind power begins to feed into the system, the transmitted price falls. Intelligent charging controllers then increase the amount of power they are taking from the grid. In the opposite situation, say in California on a hot summer day with no breeze, the price can be increased and the controllers would reduce the amount being drawn. This uses regular market forces to regulate demand in step with supply. And something even more magical could happen. If a natural gas generator is part of the system and if the price of electricity rises above the cost of generation from gas, the home’s generator could start. Now we mode-shift the generation from the AC power grid to the natural gas system. It is not much different than the utility firing up gas turbine “peaker” plants but it is decentralized and happens according to the current price and the customer’s needs. Should the price rise high enough, the controller might stop drawing power completely. If the household then decides to use the electric range or the dryer, and if the power is currently cheaper from the gas system, the gas generator would start to make up the shortfall.

    By automatically shifting or reducing the load like this, yet not having any impact to lifestyle because of the local storage, the grid could be made much more stable.

  14. Bruce Fredrick permalink
    June 1, 2015 7:13 am

    Mike, you may not be considering all of the economics involved with a backup power system. The captial cost for the investment is only a piece of the puzzle. Assuming the same kwh storage, the cost is capital cost/cycle + (energy loss cost)/cycle. The lithium Ion is about a quarter the cost of lead acid when considering both, which is why nobody has a bank of lead acid cells hanging on their wall. Considering lead acid has a life of 300-500 cycles and lithium batteries have a life of 5,000 to 10,000 cycles is a game changer in the industry. Lead Acid looses capacity over time much faster than Lithium and requires labor intensive battery replacements due to the low number of cycles. Lithium Ion is the first technology that offers a backup power system that is affordable for those that can’t invest in a diesel genset and associated maintenance. Natural gas is an option when available, but the key driver for Lithium is the 90% efficiency versus the 40%-60% efficiency of lead acid batteries. If you look at your cell phone, there is a reason it doesn’t have a sealed lead acid battery. Lead acid can’t compete. The solar or renewable use of Lithium batteries muddies the water a bit. This is a backup power issue and storage for those areas where you can get $0.05/kwh on the back hours compared to $0.40/kwh or more during peak hours. The ability to use Power Walls for solar storage is an added plus. It not only works out on paper, but in real life, that this technology, whether by Tesla or others, does offer some good options for many, especially in those areas that experience short power outages several times per year. It certainly won’t work for everyone, but my backup diesel will be put out to pasture when these become available.

  15. crosspatch permalink
    June 1, 2015 3:33 pm

    The power companies that charge different rates for different times of day have been loath to allow these sorts of storage systems in areas where they have feed-in policies. They are worried about people buying cheap power at night and then selling the power right back to them during the day (Sort of like going into the soap business after having watched Fight Club). One way around this is to say that people with such systems MAY feed in excess power but only at the lowest price over the past 24 hours. So if one has such a system and also has local generation such as wind or solar, they can feed their excess to the grid but only at the lowest price over the previous 24 hr period. This gives a disincentive to buy power and sell it back but would provide a market for honest excess power. It also would provide a disincentive for one to run their gas generator and sell the power to the grid.

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