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January 5, 2016

How Long Does It Take to Pay Off a Tesla Powerwall?

January 5, 2016
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One of the biggest problems with electricity from solar and wind power is that these sources of electricity are not reliable because of their intermittent nature. We rely on having electricity when we require its use—24/7. Anyone familiar with the third world or even developing countries knows that unreliable forms of energy are a huge impediment to modern living standards and quality of life. One suggestion to make these intermittent sources more reliable is to use batteries to store electricity when the intermittent sources are producing electricity and then use the electricity when the sun goes down or the wind stops. The issue has always been that the battery back-up is expensive, particularly with regard to the scale of the grid or cost of batteries for home use. Tesla claims that they have overcome much of these problems with its Powerwall battery.

Powerwall is a daily use battery that is produced and marketed by Tesla to provide power to homes or businesses for part of the day, off-setting some electricity costs.[i] The issue that remains is the cost. How much does Powerwall cost initially, how much does it cost to operate, how much electricity will be offset, and how many years will it take to pay back the initial capital and installation costs? These costs must be considered in order to fairly compare our current electrical system to those that government policies are promoting through their push for renewable sources of energy. This article provides answers to those questions and a tool to estimate the payback period based on local electricity costs.

Powerwall Cost and Operation

Buying a Powerwall and inverter, as well as having it installed is estimated to cost $7,340 by SolarCity[ii] (like Tesla, Elon Musk is the CEO of SolarCity). The daily use Powerwall for homes is rated at 7 kilowatt hours,[1] with round trip battery efficiency estimated at 92 percent, and inverter efficiency estimated at 95 percent. About 7.5 kilowatt hours is needed to charge the Powerwall, providing about 6.5 kilowatt hours of power once charged.

With some utilities, consumers can choose between flat-rate electricity pricing (the price is the same no matter the time or day or demand on the electricity grid) and peak-rate pricing. With peak-rate pricing, electricity rates are low during off-peak hours and higher during peak hours.

To make optimal use of Powerwall, it should be charged using lower cost off-peak electricity, then operated when peak rates are in effect. If the home or business has solar panels or wants to invest in them, Powerwall can be charged with the solar power during the day, then used to power the home in the evening, night and/or morning.

As an example, assume peak rates at $0.15 per kilowatt hour and off-peak rates at $0.06 per kilowatt hour. At the off-peak rate, it would cost $0.45 to charge the Powerwall each night. Operating the Powerwall for 6.5 kilowatt hours the next day, saves $0.98 of electricity charges. Factoring in the charging costs, saves $0.53 a day of electricity costs, or $193 a year, requiring a payback period of 38 years, which is almost 4 times the warranty period of 10 years for the Powerwall.

If solar power was used to charge the Powerwall, it would save the charging fee of $0.45 a day, making the Powerwall savings each year $358. Factoring in the installed solar panel cost of $3,570[2] for a 1.5 kilowatt system[iii], makes the payback period 31 years, still 3 times the warranty period.

According to a 2012 study, the Federal Energy Regulatory Commission found that only 1 percent of U.S. residences have off-peak vs. on-peak electricity rates.[iv] If a U.S. household has a single electricity rate at say $0.12 cents per kilowatt hour, it will cost more to charge the Powerwall than it provides in electricity. In this example, it will cost the household $0.12 more a day ($44 a year) to use Powerwall than if the household purchased all its electricity directly from its utility company. In other words, the Powerwall must be charged at a low electricity rate or by a solar panel system, in order to make Powerwall economic. And, even then, the payback period for U.S. electric utility rates would be much greater than the Powerwall warranty period.

The tool below allows the user two options for determining the payback period for using Powerwall to offset electricity rates—either charging Powerwall using off-peak rates or via a solar system. Both options require the installed cost of Powerwall. The user needs to select the option, then either input the off-peak and on-peak electricity rates, or the installed cost of the solar system and the on-peak utility rate. The tool will then provide the user with the payback period. Please note that the tool does not work for a single utility rate because, as noted above, it would cost more to charge Powerwall than to purchase power from the local electric utility.

With the Obama Administration pushing policies to convert more of our electricity to intermittent renewable sources like wind and solar, it is important that the public understands the costs and tradeoffs from our current system, which in most people’s minds, works well across a wide range of demands and uses. This blog answers some of the questions of the mysteries of energy storage and serves as a tool for consumers to judge the government’s experiment and the costs that may be hidden by the hype promoted by those involved in providing “fixes” to the use of intermittent renewable energy in place of our normal, on-demand, reliable electrical system.


[1] There is a 10 kilowatt hour model for businesses to use instead of a backup generator. The cost to installers is $3,000 or $3,500 for the 7 and 10 kilowatt hour Powerwall, respectively.

[2] The $3,570 is for a 1.5 kilowatt installed system after government rebates. The cost can range between $2,000 and $6,000, depending on the quality and longevity of the system.

[i] Gizmodo, Tesla Powerwall: A Battery for Your Home, May 1, 2015, http://www.gizmodo.com.au/2015/05/tesla-powerwall-a-battery-for-your-home/

[ii] Lifehacker, Tesla’s Powerwall: Crunching the Numbers for Australia, May 25, 2015, http://www.lifehacker.com.au/2015/05/tesla-powerwall-crunching-the-numbers-for-an-australian-suburban-home/

[iii] Solar Choice, 1.5 kilowatt solar system: Pricing, outputs and returns, October 18, 2012, http://www.solarchoice.net.au/blog/1-5kw-solar-system-pricing-outputs-and-returns/

[iv] Friedman, Consumer-Friendly and Environmentally-Sound Electricity Rates for the Twenty-First Century, March 1, 2012, https://gspp.berkeley.edu/assets/uploads/research/pdf/Friedman_HOOP_retail_electricity_pricing_1.1.pdf

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  • Bob Coco

    I installed my own panels, my own wiring and own invertor and back up batteries. It’s not hard. You’ll only need an electrician to go over your work prior to code inspection if your town requires that. You don’t have to hire Solar City, installation is not difficult and if you can’t do it yourself any electrician can do it in a couple of hours. not having to pay installation costs reduces payback time, big time!

    • joe bloe

      hiring an electrician to install it, or even inspect it does require you to pay installation costs, as you paid. installing a system like this is well beyond most peoples ability and is unrealistic. of course a very small number of handy people with a lot of extra time on their hands could theoretically lower the cost of any project. or you could cost yourself much more.

  • Kevin Rossignol

    Great article. Quick quibble though, I believe Elon Musk is the Chairman of Solar City, and his cousin Lyndon Rive is its CEO.

  • Owen Iverson

    too bad IER seems to have some questionable interests when discussing clean energy issues. one example… http://www.desmogblog.com/institute-energy-research-admits-it-was-behind-anti-wind-study

    • Michael B

      Thank you for saving many of us the search. “IER”… pfft.

      • joe bloe

        never rely on a biased source for your research. do it yourself or be duped.

    • joe bloe

      are their numbers or calculations questionable? you don’t say, i wonder why? The article you link to doesn’t even provide any evidence their sponsored wind energy article is incorrect. please provide scientific evidence that what this article asserts is untrue. in all of the research i have done, this seems like just another rich man’s toy like his car.

    • joe bloe
      • Michael B

        And the comments under that article thoroughly refute it!! What a joke this whole site and organization is. Last time I visit…

  • Nathan Scott

    Of course a single inverter can be used for multiple powewalls, so you’ve chosen the last realistic scenario. You are also not complaining it to a generator/cost of running electrical wires into rural areas which Tesla has claimed should be their primary customer.

    My city’s program is .07/.21 nights and weekends. Using my prices and three powerwalls, the payback period drops to less than 12 years.

  • J.P. Katigbak

    Interesting read on the cost figures for the Tesla company’s pet project, Powerwall, in the US. Wait until I see this. – J.P.K.

  • dmharper

    I see this as an alternative to a back up generator for temporary power failures. Where I live in south Missouri we have several short term outtages a year, usually from a few minutes to a few hours. Gas powered backup renerators run $5500 installed. I see a substancial market for this as backup power.

  • J.P. Katigbak

    I say that the so-called “Powerwall” is a new sort of a back-up power generator, although it does not necessarily substitute for a gasoline-powered back-up generator. Perhaps there is a different market for the “Powerwall” to sell, not only in the US but also in other countries, too.

    Hmm.. I wonder why the ideologically-motivated aspects of environmentalism still prevails, by the way? – J.P.K.

  • j2martin

    Hello. James here from Solar Choice. You make reference to an article of ours here (specifically about 1.5kW solar systems). I should note that these prices are in AUD and apply to Australia only as they incorporate a federal incentive that significantly reduces up-front installation costs.

    I also wanted to point out that the $2.38/W figure that you quote is actually a bit out of date – our most recent figures (Dec 2015) show an average of $2.07 and a low of $1.17/W. I believe that US prices are significantly higher.

    http://www.solarchoice.net.au/blog/category/installation-advice/solar-system-prices-2/residential-solar-system-prices/

    1.5kW systems are actually less common than 3kW, 4kW and 5kW systems these days. These larger systems are less expensive per watt than 1.5kW and 2kW systems as well.

    I’ll be updating the 1.5kW article along with a number of other outdated articles on our site by the end of Jan 2016.

    Hope this is useful – and best of luck.

  • Tom Adams

    Including the self-discharge rate and the performance degradation rate over time would further diminish the payback.

  • Your “come-on headline” says Powerwall batteries may consume more energy than it produces? But where do you document this?

  • Robert Haylar

    Tesla have produced an Operator’s manual.
    Capacity is 6.4kWhr, not 7kWhr. That’s a significant difference of -9% in the throughput, upon which return of investment calculations are based.

    Round trip efficiency is 92.5%, but measured at the previous 2kW output, and not the current 3.3kW.
    There are pumps and fans to keep the battery within its operating range, and they will add to the losses.

    Waranty:
    “Powerwall includes a 10 year limited warranty, which covers defects in
    parts and workmanship, as well as at least 60% energy retention after 10
    years.”
    60% of 6.4kWhr is 3.84kWhr. Round trip efficiency will suffer greatly, well before that point is reached, and so will the effective throughput.

  • Bruce Duncan

    IER is a very politically slanted organization with questionable motivation as many of their articles appear to suggest.

  • Will

    Elon Musk is not the CEO of Solar City… This article is really poorly researched.

  • John McMahon Miggins

    I have done solar and battery back up for many years and anxiously await the Tesla Powerwall product. the cost is low for a typical battery back up and I expect that the capacity will require several powerwalls to achieve independence. I do find intriguing the concept and an a little disappointed that you must choose between battery back up or power management but cannot do both with the powerwall. power management is store and use when you want, back up is for grid outage. There are a number of other solutions available now that I feel are achieving the holy grail of battery back up with power management based on traditional battery based inverters like Scheider XW6848 or the SMA sunny island. One I do like is http://www.juiceboxsolar.com they are more expensive but more capacity as well.
    I would be happy to assist you in energy independence and do applaud Tesla for this product it will fill a great niche in the power management product, for battery back up go traditional or multiple powerwalls.

    [email protected] http://www.harvestsolar.net

    • SolarInSeattle

      Thank you for your informed post. It is refreshing to hear from someone with experience instead of the folks just repeating what they read somewhere. Your ‘niche’ comment is spot on. I have a 21 panel system connected to the grid with net metering. Even in the Seattle area, we generate more power than we use in a year. Payback is about 10 years, then I’m in the positive. I am looking at the Tesla power pack for an electric conversion.

  • Donald Broadhurst

    Your figures do not figure in the power cost for the running of the rest of the home which will also be powered by solar and stored in the Tesla battery. When these costs are figured in the Tesla battery system would quickly pay for itself.

    • Robert Haylar

      The article assumes there is solar. But is it useful to add a battery?

      “If solar power was used to charge the Powerwall, it would save the
      charging fee of $0.45 a day, making the Powerwall savings each year
      $358.”

      At the given tarrifs, the battery can save only 6.5kwh x $0.15 = $0.98/day or $358 year, even if the cost of the solar energy to charge the battery is calculated as $0.

      The installed cost of the battery is $7,340. If the saving were $358 year, the battery alone would take 20.5 years to pay off.

      In practice, the battery will slowly age and lose capacity. Savings will be much less than $358 year. Wether solar pays or not, is another question, but the battery adds costs that will not be returned.

  • sharpie

    Wouldn’t it make sense if you are on TOU rates to charge the Powerwall at off-peak hours, and then push the energy stored in the battery back onto the grid during peak? Assuming you also have solar, you should push all the excess energy you have available from solar and the Powerwall (that is, energy you are not consuming in your home) back to the utility during peak hours. Buy the energy back at off-peak to recharge the Powerwall and repeat. If the peak rate is 3x or 4x that of off-peak, you will be saving a hell of a lot more money doing this than just charging the Powerwall off-peak and using it during peak. You should always deplete the rest back onto the grid at peak. Am I mistaken? Solar pushes excess to the grid automatically. Is it possible to force the Powerwall to do the same?

  • chris brown

    Why are the $.05/kwh charged for distribution, Rsp, Dmd, ERI, EmPower, Env Surcharge, and Franchise Tax included in your calculations. If I charge with solar I avoid those charges as well … but I guess that doesn’t make your Fossil Fuel Lobby driven business case look so great.

  • grindle

    If your utility allows net metering there is no need for a battery. My system reports how many kWh I generated from solar. My cost is $0.17 a kWh.
    In April I generated 975 kWh which saves me about $165,
    Its so simple with Net Metering saves about $5K.

  • Patrick Chu

    If you are a Green Mountain Power customer in Vermont (which I am), the payback for you is 17 years.

    GMP will sell you a Powerwall for $6500, and give you a $31.76 monthly credit on your bill to tap it for energy whenever it wants. (Or, you can just pay $1.25/day to lease it forever). Or, you can just buy it an not give GMP access to it, but then you don’t get the monthly credit.

    $31.76/month x 12 = $381.12 a year of savings.

    Using those numbers, the payback on this is 17 years, after which you make (or save, however you want to look at it) $380/year on your electricity.

    If you keep it for 30 years (the original payback calculation in the article above), you will make a profit of almost $5000 ($4953=$381/year x 13 years)

    These prices and conditions are available to all Green Energy Power customers already, today.
    http://products.greenmountainpower.com/product/tesla-powerwall/

  • Chris U

    FL is corrupt and owned by the FPL. They don’t want you to use solar.

  • Harold Hall

    I have solar from solar city and an early version of this. The analysis is fundamentally wrong. You buy solar to save money. You buy battery backup not to save money. It is cheaper today to sell power to PG&E, and buy it back, than to store it yourself. But when PG&E is down you have no power. Even in the middle of the day you have no power from your solar if PG&E is down. With the battery backup I have power even if PG&E is down. This is a minor thing unless there is a long outage. If we have the “big” earthquake, power will be off for a long time many places. My fridge will stay cold with power provided by solar, and the battery keeps the solar controllers working.

  • William Smith

    First I would tell you when it’s a paid ad on Google to get here it smelled FISHY

    http://www.sourcewatch.org/index.php/Institute_for_Energy_Research

    Founded by the Kock Bros. Not saying everything is a LIE just got the one issue with the article bash the competition promote everything I sell.

    The real cost of energy is our health care and the wellness of our people, that being said…. number 1 greenhouse gas polluter is from your diet and desire to eat COW, PIGS, and Chicken! Not saying stop just go back to 1950 portions sizes for meat! I own a solar install company am a republican, to be widely accepted has to make economical sense, oil and gas will be the only option for planes and plastics unless you want a plane the size of a football field with 1 sit in it… way to go Sunpower solar (total waste of time but good PR to the tree hungers) And yes I sell sunpower products too.

  • Tom Winzig

    The founder of Institute of Energy Research (based in Houston, Texas) is Robert L. Bradley, Jr, who worked “16 years at Enron, where for the last seven years he was corporate director for public policy analysis and speechwriter for Kenneth L. Lay.” https://en.wikipedia.org/wiki/Robert_L._Bradley,_Jr.

  • George P

    1. Your article never approaches proving what the headline said.
    2. I thought your “About” page said policies should not be pursued due to emotional responses, yet the end of this article clearly attempts to jab the Obama administration and Government polices in general.
    Very poorly hidden agenda here. I am disappointed.

  • Van Hamlin

    This a great idea but is in its early stages. Right now, you will spend about $30,000.00 just to have enough solar power for a small family. This system needs a backup for prolonged periods of low sunlight. Wind is a good companion source but add another $15,000 for sufficient generators to keep your system recharged. You still could experience brown or black outs. Add those UPS systems to computers and such, another $1000.00. Fossil fuel standby generator could do the trick to solve this problem too. Add another $3000.00 for this baby. So our total cost is about $50,000.00 for a system that has a battery storage system warrantied for only about ten years. That indicates an annual cost of about $5000.00 per year. This is approximately, $1400.00 more expensive than hooking up to the power company.

    Some government subsidies do help reduce this costs. Some power companies vary the cost of electricity into peak and off peak rates. This can be a decision factor as well. The bottom line is that any saving you can squeeze out of these systems requires 30 years of use to break even. That does not include the two additional battery changes because no one knows what batteries will cost in 2026 and 2036. This system does not finance well either. Interest rates are low now but who knows, buy now and loose less money, I guess.

    Besides the cost, solar panels are ugly. They have developed new products that look just like common roofing materials. Vertical windmills can be very attractive but the older propeller style are really ugly. Burying that LPG tank and having a generator out in the yard could be a hassle too! Someday, George Jetson will enjoy this technology for almost nothing but right now, its a good solution for your cabin located way out beyond any power lines.

    I envision my modular home up on the South Platte River completely free from the grid. I will use cellular satellite phones and internet. My bunker, will be amply stocked with food, seeds, weapons, ammo, medicine and gold. This probably means that I will be on a no-fly list and an IRS blacklist. All kidding aside, this technology is still in the hobby stage but is a really good goal for those with vision.

  • Ryan

    So is IER a Koch Industries shill? I really wish I could report shitty google ads.

  • Jacob Johnson

    The timeline on the payoff does not seem right. If it costs about $12,000 for a solar system and powerwall, how is it not paid for in under 10 years? My average electric bill is $150/month. If I no longer need to pay for electricity due to a solar system, and use a battery for sunless periods of time, than the system is paid off in under 7 years. Yeah, it takes time to charge the wall. Generally people are at work for at least 8 hours a day (not using much power). That gives the solar system plenty of time to charge the battery. Summer months are obviously going to be better than winter. I would still assume in most cases you will get close to 6-12 hours of charge time a day (cloud cover will dictate quality), and require battery use for 3-6 hours.

  • Bilbo Baggins

    Part of the equation that studies like this miss is that not everyone is thinking in terms of ‘when will this pay for itself?’ I’ll pay to install this or solar or wind (or all of them) without going bananas over the ‘payback’, because it’s going to be the ONLY way one day, whether that happens in my lifetime or not. I want to set the example for my kids and grandkids. I want to know that I’m using electricity without having to use coal and other fossil fuels. Not because I’m a tree-hugger, but because I really dislike paying the power company!

    • joeinslw

      I like, no I mean I love the idea of free energy or solar, but the question has to be in your mind Mr. Baggins, do I want to spend more money on this idea than buying energy from the grid just because I don’t want to see the energy people collect my money?
      Tesla has been advertising $3,500.00 for a powerwall, and all along I think that everyone has been thinking of a solar panel that would charge it as well, after all what would be the point if you didn’t have a panel?
      That is if you had to buy energy to charge the powerwall, then the idea of free energy would go right down the drain.
      So to my mind they MUST go together, the powerwall and the solar panel installed at the same time, so the panel could charge it everyday, then and only then, would it be free energy. The benefit of course would be the energy people or grid would stop burning coal or oil, and would have to wean itself off all fossil fuels, and start selling solar energy instead.

      • Gary Masters

        It helps to read the article and see that power sold at different rates over a day can provide savings for those who buy low and use all day.

  • James McCormick

    Wikipedia: “The institute [for energy research] is considered a front group for the fossil fuel industry. [16]”

  • Mario Sanchez

    I just went through the FPL bill in Florida and what the article doesn’t mention in their analysis all the other costs attached to the bill like: Storm charges, Franchise charge,Gross receipt charge, Utility tax, Residential service customer charge, plus the federal government taxes and charges. You might add the late fee charge if you made your payment late. All this things add up so this analysis is flawed to begin with.

  • Wade Dufrene

    i love the IDEA behind this. but in 10 yrs what is the Process of disguarding the Batteries? many of these Batteries are more harmful than Fossil Fuel SPILLS!?! thats my biggest concern here! but man the Power wall will be a game changer! we just cant fix a problem and create another! Lithium ion batteries and LAND FILLS dont go together! so not sure of what CHEM in Tesla batteries or how to nutralize them at end of life!

    • David Rand

      Batteries are reusable and recyclable oil is not. The volumes are like a flea vs and elephant when any waste is put back to Earth.

  • TJ

    I think what this article is missing is the overall global impact. Elon Musk’s ultimate intention is to lessen our need for burning fossil fuels -and ultimately slow down this climate change escalation path that we’ve set ourselves on. Not to mention providing electricity to billions in regions where they currently don’t have electricity. And just for the overall global impact, I would love to be a part of that. Less for my own personal gain, more for the good of the whole

  • David Rand

    Taking select numbers and twisting them into the need to keep destroying the planet. Let’s factor that in guys, I guarantee you it is more than 45 cents a day. Welcome to the propaganda machine, here’s another tool of theirs. http://www.desmogblog.com/institute-energy-research-admits-it-was-behind-anti-wind-study

  • SkyMogul

    Obviously a fossil fuel lobby slant here. The statistics blatantly omit any inflationary increases in the cost of grid power over the analysis period. They assume that power will cost the same amount over *30 years*. Personally, my cost per kwh from the grid has more than doubled in the past 15 years.

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