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
