The Institute for Energy Research is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets.

About IER
Latest Analysis
January 5, 2016

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

January 5, 2016
Print Friendly

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,

[ii] Lifehacker, Tesla’s Powerwall: Crunching the Numbers for Australia, May 25, 2015,

[iii] Solar Choice, 1.5 kilowatt solar system: Pricing, outputs and returns, October 18, 2012,

[iv] Friedman, Consumer-Friendly and Environmentally-Sound Electricity Rates for the Twenty-First Century, March 1, 2012,

View Comments
  • 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…

    • 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.

    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.

    “Powerwall includes a 10 year limited warranty, which covers defects in
    parts and workmanship, as well as at least 60% energy retention after 10
    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 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.

  • 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

      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.

Back to top