Savings from Tesla’s Powerwall? I don’t think so…at least not in the US

The long term plan of Tesla CEO Elon Musk to establish a widespread energy solution might finally be coming to fruition. After the public adoption of his electric cars, the Tesla Model S and Roadster, Musk has now moved on to the release of both a battery for residential use and a larger battery for industrial application, called the Powerwall and Powerpack, respectively.

Powerwall is a rechargeable lithium-ion battery designed for energy storage for residential consumers. According to Tesla it is primarily designed “for load shifting, backup power and self-consumption of solar power generation.” Two variations of the Powerwall have been released: a 10 kWh model which is listed at $3,500 and a 7 kWh model listed at $3,000. Their big brother, the Powerpack, is expected to be released in 100 kWh capacity blocks and is designed to be scalable from 500 kWh to 10 MWh.

For the average consumer utilizing solar panels, the Powerwall gives the owner the ability to store energy, allowing them to utilize the energy as needed. But does the Powerwall actually give you the opportunity to reduce your energy costs? Let’s first look at the total cost, remember the $3,500 or $3,000 is for the DC system only, meaning you still need the DC-AC inverter. The inverter cost alone adds an additional $1,000 to $2,000 to the total cost. SolarCity, the solar provider company where Musk is embedded as the company chairman, is quoting $7,140 for the 10 kilowatt-hour all-inclusive installed system, or “customers can prepay $5,000 for a nine-year lease, which also includes installation, a maintenance agreement, the electrical inverter, and control system.” All said and done the true cost to buy is $714/kWh, which is a very reasonable price when compared against competitive alternatives.

For those of you thinking that you will be able to recoup the setup cost by selling energy back to the grid, you’re out of luck. The pure economics just don’t make sense in the United States, but just like Musk states, “that doesn’t mean people won’t buy it.”

Let’s look at the cost savings utilizing load shifting from a best case scenario perspective. Load shifting is when the battery charges during non-peak hours (when you are typically not home) and sells energy back into the grid during peak hours when prices are at their highest based on increased demand. This can be done for customers using a time-of-day (ToD) pricing plan.

First we need to determine just how efficient the battery is. The storage system itself is listed at a DC-DC efficiency of 92%, however this is not the total round-trip efficiency. Remember the energy needs to be inverted to produce AC electricity and this process creates some efficiency loss. A good inverter is estimated at 95% efficiency making a total round-trip efficiency of 87%. So, for all intents and purposes, the 10 kWh produces 8.7 kWh of AC electricity.

Based off this information, let’s take a look at the numbers using actual ToD data from PG&E for Northern California.

• Average Rates (summer and winter rates were averaged): $0.1121 (non-peak) and $0.31284 (peak)
• Peak time period: Weekdays 12PM – 6PM (6 hours)
• Let’s assume a 1.45 kW constant load over the 6 hours (utilizing the battery to full capacity).
• 8.7 kWh x $0.31284/kWh = $2.72/day
• 8.7 kWh x $0.1121/kWh = $.98/day
• Daily energy cost savings = $1.74 or $452 annually

Again, this is a best-case scenario assuming that the customer was buying electricity at peak rates and now is buying at off-peak rates, and that the battery was fully cycling Monday-Friday 260 days per year (currently the 10 kWh model is only optimized for monthly cycling while the 7 kWh model is designed for daily use).

So, if you had purchased the Powerwall at $3,500 and an inverter at $1,500 and completed the install yourself over a 10 year period (based on product warranty/lifecycle) you would still not break even, especially if you factor time value of money into the equation. Based on the pure economics within the US, the Powerwall looks to be a product that will be useful for people who want to stem power outages or live off the grid, but for the average consumer it’s not quite there yet. However, the industrial Powerpack, which is currently being tested by major companies like Amazon and Target, may be a different story. We can be sure that they are doing the same kinds of total cost and efficiency exercises to evaluate the ROI on a corporate level just like we have done here from a consumer perspective.