So Friday Elon Musk finally gave us the full details on the home battery he has been hinting at for the last few months.  As expected, it’s basically a smart battery that you can mount on a wall that will smooth out your home or buildings power demand from the grid as well as extend the power delivery from solar if you have that installed. And all for the low low low price of $3000 for 7kw/hr at 1000 cycles. Sounds great right?  Well… not really.  When you do all the math, it does not work out that well… for now.

First some REALLY basic math as a thinking exercise

Musk said Tesla’s 7 kwh capacity battery would cost $3,000, while the 10 kwh capacity one would be $3,500, however that does not cover the DC-AC inverter and installation which can add another $2k.  So let’s do the easy math..  A 10 kwh system could supply 1,000 watts of current to your home for 10 hours.  ok, cool.  So if we want to be able to run this fully off the grid we are going to need more than one.

The U.S Energy Information Administration says that the average American home consumes about 11,000kWh per year, or about 30kWh per day. So if an average user wants to get completely off the grid, it would only take three 10kWh Powerwall units—at a total of $10,500.  That’s a lot of money to get off the grid.  If we say the average power bill is $100 a month, it will take 100+ months to ROI the units, and that is assuming you already have solar power.  If you do not, then let’s add $10k for panels, inverter and installation after rebates. (btw, costs vary GREATLY depending on location) So we need to add another 100 months.  That takes us to around 16 years to ROI the system.  ($20k/100/12)

Now that was some pretty simple math we did there and for those who really know the detail numbers, ease back on the hate mail. I went with hyper simple math just to make a point. Now, let’s look at two common use cases for the home. Remember this device is targeted for home owners; industry, and the edge of the network for those with unreliable power or very high prices are different cases.

Home use case

So we have two use cases for the Powerwall. First the home user that wants to save money by Load Shifting and second the Solar Panel owner who wants to save money and/or go off the grid.  Let’s take the most common case first.  A home owner that wants to save money.

Load Shifting

Load shifting is a pretty simple idea.  Buy power in the cheaper hours and store it.  During the day when power is more expensive, use the power you saved previously. This is called time-of-day (ToD) pricing plans, this can be a significant cost saver. Let’s do the math on that using actual ToD numbers from a US power company and assuming the battery is delivering power during the entire stretch of peak hours. (these numbers come from Tom Lombardo at enginerring.com.)

Rates: $0.203217/kWh (peak) and $0.04643/kWh (off-peak)

Peak times: 2:00PM – 7:00PM (5 hours)

Assume a constant 1.7 kW load over five hours, which completely drains the battery every day.*

8.7 kWh x $0.203217/kWh = $1.77/day (if the customer were buying electricity at peak rates)

8.7 kWh x $0.04643/kWh = $0.40/day   (customer buying electricity at off-peak rates instead)

Energy cost savings = $1.37/day or $500/year

If a person spent $3500 on the Powerwall and another $1500 on the inverter, it would take ten years (simple payback) for the unit to pay for itself.  Since it has a 10 year warranty (and so do most inverters), it’s a break even situation at best.  However, it may not work out exactly like that because remember after a number of cycles, even lithium-ion lose efficiently.  So, depending on just how far you drain the battery, it may take a little bit longer, perhaps 12 years. Now if you do not need to pull that much power during the day, then you may go with a less expensive 7Kw model and save $500, but that only changes the math for a year.  So how many home owners would drop 5k on something with a 12 year ROI if things works out?  Not many, but more than you think.  I’ll expand on that when I talk about ‘Buying against the math’.

PV (Solarpanels)

For the homeowners who already have PV’s, the math make no sense.  “What?” I can hear you say.  I thought this was FOR PV owners.  Well, yes, but not ALL PV owners. See the ROI for PV’s is about the same as the math we just did above, but instead of buying your power at the low rate and using it during the high rate hours, PV owners generate power during the peak hours and sell it to the power utility, then use power from the utility at the lower rate hours when the sun is down.  If designed correctly, you should have a net 0 on your power bill.  So if you are already NOT paying for power, why would you buy a Powerwall?   Ahh.. Well here is where it gets complicated, interesting and why the Powerwall will make sense in the near future, and in time, more and more home owners will buy one.

Changing the rules of the game

Lets take a little trip to Hawaii.  In Hawaii, everything costs more, including the electricity. Some home owners have been trying to buy solar to not only save money, but basically pay little to no money to the power utility.  Other home owners are paying $300 to $400 a month.  However, not everyone can get solar because the utility cannot handle so much power coming back into the system, and worse, the utility loses money when people go to solar.  Remember the utility still needs to maintain the system and they need to make improvements to the system to handle all this power coming from the PV owners. The demand for solar is so large, that some people have been waiting 3 years to get it. So what happens is those with PV pay little to nothing and everyone else has to make up the difference, so you can imagine there is a backlog of people trying to get PV.  This is becoming such a problem that Hawaii is thinking of ending the practice of buying power back at the peak rate and instead pay at 50% rate or go to a Feed-In Tariff system. This is true everywhere by the way, not just Hawaii. In fact California may fill up on the number of home buyback agreements in 2016. Paying the home owner 50% the going rate is great for the utility, but guess what happens to the home owner’s ROI.  It just doubled.

Now, remember when I said most people would not bother with a 12+ year ROI?  Well, as more PV system prices drop, more systems will get deployed and soon all utilities will have this problem, and they will all go to the same sort of solution.  Do not pay as much to buy peak power or simply have a line connection fee. If the power companies decide to not pay as much for your PV power, then it does not make sense to sell it.  Instead, you may as well hold on to it yourself and not pay for the offpeak power. Basically go partially or fully off the grid. That takes us back to the math we did in the beginning.  If you already have solar, and your utility bill is not zero’ing out anymore because the utility changed the rules, then change your math.  And now the Powerwall makes sense.  So now you see where Elon got his 5 to 10 years est.  Now that we are at the tipping point for the cost of solar, and now that we have the Powerwall that makes home storage affordable and smart, the utilities will see more PV systems deployed and lose more money. They will be forced to make a change, and soon.

One is not enough

You may be asking yourself, or me depending if you are one of those people who like to yell at the screen of your computer thinking the author can hear you, that 12 year ROI is really not that bad.  That is basically the same ROI for solar today.  Well there is some details I left out.

Remember in the beginning of our simple math what it would take to get ‘off the grid’?  We did not buy just ONE of these units.  We bought three. Taking us to $10.5k  There is another reason you want 3 of these bad boys and that is because the power output of one these units is just 2kW continuous, 3.3kW peak.  So good luck running your 1kW toaster, 1.5kW kettle and everything else in the house at the same time.  Nope.  Not gunna fly. And what if its summer and you need to fire your old 5kW AC?  You are going to need a near 10kW While looking these things up I found a really good chart on the average power consumption of home appliances.  I placed it at the end of this post. Check it out.  See just how much power you can be pulling all at once.

Buying against the math

So how many people would invest $5000 on a Powerwall that MIGHT pay for itself in 10 years?  At first, not that many, but more than you might think. Remember, this is a Tesla device, not some ugly box sitting on the ground somewhere.  This device is very well designed, can mount on a wall and thus not take up limited floor space in a garage and smart enabled such that knows when to buy power, how much to store and when to try to sell if it has too much. Remember when Elon first started selling the Tesla roaster?  People thought he was crazy.  Well here we have the same situation. The people who will buy the Powerwall will not be concerned about the ROI, but instead will buy the device because they know they are helping the environment, getting a well-designed and good looking device for the home and, eventually, will pay for itself.  It’s from Tesla so they know it is the cutting edge of technology both physical and cloud technology.  Remember the Nest?  Same thing.  A VERY well designed device that looks good in the home that makes the home more intelligent and efficient.  The Powerwall is not that much different.  There will be enough people buying it that it will do what Elon wants, create demand for more batteries from his gigafactory to drive the price of batteries even lower. Then guess what? As the price goes down, the math gets better.  So in 5-10 years, I can see home battery packs becoming the norm.

Who else will buy the Powerwall now?

Many people will.  A number of utilities and big box corporations have already signed up for the Powerpack.  Amazon, Walmart and Target are already testing the Powerpack in stores across the US.  For larger corporations, where 12-16 year ROI are not a big issue and having reliable uninterrupted power is of value, I can see the Powerpacks gaining acceptance probably from the same customers who bought in to the bloom box.  Remember those?  They were released with what seemed the same hype as the Tesla announcement, but as solar and wind got cheaper, the ROI for chemical power generation make less sense.  But I digress.

There are a number of use cases where people will buy the Powerwall today.  People who live on the edge of the power grid and have experience power loss on occasion.  Those who’s utility prices are far higher then the average, hello again Hawaii, and those who just like the idea of living off the grid. However, a HUGH market may not be in the US.  In India where even the wealthy have to deal with power interruption, may buy these in large numbers. Found this great comment on reddit.

In countries like India, very few cities ever get 24×7 electricity. You can be a millionaire, but still you can not have 24×7 electricity unless you install some sort of an expensive backup system. Almost every middle class and richer family owns a battery or fossil fuel based backup unit for their house and from the smallest business to the largest industry, uninterrupted power supply is always a huge issue.

The existing battery based solutions have many of the issues that Elon Musk pointed out in his announcement. They use old-school batteries (no thermal management, nasty leaky chemicals and toxic fumes). They also need special storage areas and most don’t “just work”. At $3500 for a 10kWh storage, it is a little more expensive than some existing good quality devices, but it really isn’t that much more expensive! Reliability and easy of use are very important and if Tesla can make a reliable and high-quality product which is also scalable enough that even businesses can own, then it will be a huge deal in many parts of the world.

Also if you tie it to other sources like solar, then many remote locations that were never connected can also have some power! (Think of hospitals, internet access stations etc.).

So to sum up, I think there is already a market for a very well designed home battery back up system, and even though the numbers do not work right now, there will be enough demand to get the economies of scale wheel turning fast enough to bring prices down. That it will be more attractive to the average home owner, which in turn will increase demand which in turn will bring prices down even further. And all this does not take into account improvements in battery technology which could accelerate cost reduction and cycle life even further.

Elon did not invent anything really new here, but instead, created a beautiful product, that works well and has a mission.  Somewhat like his cars.  And we know he was proven right on that front.

 

Following table is from http://www.wholesalesolar.com/solar-information/how-to-save-energy/power-table

Appliance	Watts	Appliance	Watts	Appliance	Watts
Central Air Conditioner NA	5,000	Electric blanket	200	Hedge trimmer	450
Electric Clothes Dryer NA	3,400	Shaver	15	Weed eater	500
Oven	3,000	Waterpik	100	1/4” drill	250
Hair Dryer	1,538	Well Pump (1/3-1 HP)	480-1200	1/2” drill	750
Dishwasher	1200-1500	Laptop	60-250	1” drill	1000
Coffee Machine	1,500	Plasma TV	339	9” disc sander	1200
Microwave	1,500	LCD TV	213	3” belt sander	1000
Popcorn Popper	1,400	25” color TV	150	12” chain saw	1100
Toaster oven	1,200	19” color TV	70	14” band saw	1100
Hot Plate	1200	12” black and white TV	20	7-1/4” circular saw	900
Iron	1,100	Stereo	10-30	8-1/4” circular saw	1400
Toaster	1,100	Satellite dish	30	Refrigerator/ Freezer**
Microwave	500-1500	Radiotelephone – Receive	5	20 cu. ft. (AC)	1411 watt-hours/day*
Room Air Conditioner NA	1,100	Radiotelephone – Transmit	40-150	16 cu. ft. (AC)	1200 watt-hours /day*
Vacuum Cleaner	500	LIghts		Freezer
Water heater	479	100 watt incandescent bulb	100	15 cu. ft. (Upright)	1240 watt-hours /day*
Sink Waste Disposal	450	25 watt compact fluor. bulb	28	15 cu. ft. (Chest)	1080 watt-hours /day*
Espresso Machine	360	50 watt DC incandescent	50	Cell Phone – recharge	2-4 watts
Dehumidifier	350	40 watt DC halogen	40	MP3 Player – recharge	.25-.40 watts
Blender	300	20 watt DC compact fluor.	22	* TV’s,VCR’s and other devices left plugged in, but not turned on, still draw power.**To estimate the number of hours that a refrigerator actually operates at its maximum wattage, divide the total time the refrigerator is plugged in by three. Refrigerators, although turned “on” all the time, actually cycle on and off as needed to maintain interior temperatures.
Humidifier	300-1000	CFL Bulb (60-watt equivalent)	18
Video Game Player	195	CFL Bulb (40-watt equivalent)	11
Standard TV	188	CFL Bulb (75-watt equivalent)	20
Monitor	150	CFL Bulb (100-watt equivalent)	30
Computer	120	Heaters***
Portable Fan	100	Engine Block Heater NA	150-1000
Ceiling Fan	100	Portable Heater NA	1500
Can Opener	100	Waterbed Heater NA	400
Curling Iron	90	Stock Tank Heater NA	100
Stereo	60	Furnace Blower	300-1000
Cable Box	20	Clothes Dryer – Gas Heated	300-400
Clock Radio	7	Well Pump (1/3-1HP)	480-1200

* The daily energy values listed here are for the most efficient units in their class and the information was obtained from Consumer Guide to Home and the General Electric website.