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

  • Date: 01/05/15
  • Christopher Helman, Forbes

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

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 an AC-DC inverter – about $4,000 —  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 +0.91%, has done someinteresting 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.

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 +2.49% 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.

But it gets worse. Let’s think some more about the real utility of this Powerwall system. Given that the average home uses 900 kwh per month, that equates to 10,800 kwh per year. And it also breaks down to 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 10 cents a kwh.

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

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