Tesla Powerwall and Powerpack

Elon Musk debuts its newest product the Tesla Powerwall on 1st May 2016. In the most magnificent expression of interest presentation, Elon candidly announced, with such a matter-of-fact ‘no brainer’ approach, how we could use the earth’s ultimate resource to use for smart clean energy. And what a discussion it has sparked throughout the globe. Is it a big deal? What are the economics behind it? Do Should I buy one? Is it going to change the world?

Why the big reaction?

As Tristan Edis, noted from his conversation with one executive from a large solar PV manufacturer at the Australia Solar Council.. “battery storage is a bit like teenagers and sex: everyone is talking about it, but very few of them are actually doing it. Sales of battery storage systems are minuscule. The reason sales are minuscule is that batteries are simply too expensive“. So the Tesla Powerwall has become a buzz word because of the price.

Is this a game changer?

The Powerwall can be used for “load shifting” in the home, and also to provide back-up power in the event of an outage. The Powerwall is a home battery that charges using electricity generated from solar panels, or when utility rates are low, and powers your home in the evening. Automated, compact and simple to install, Powerwall enables one to maximise self-consumption of solar power generation.

Solar Powered Day and Night

Solar Powered Day and Night

By lowering the cost to its lowest in the market, the average home, which uses more electricity in the morning and evening than during the day when solar energy is plentiful, can affordably purchase a home battery. Allowing households to bridge the gap between renewable energy supply and demand by making your home’s solar energy available to you when you need it; rather than let excess solar energy be sold to the power company and purchased back in the evening. This mismatch adds demand on power plants and increases carbon emissions. Battery Costs

Koh, Baker, Martin, Goodridge and Markiewicz of Morgan Stanley – Australia Utilities Asia Insight: Household Solar & Batteries – Battery Costs & Potential Contenders

While the Tesla Powerwall 7 Kwh and 10 Kwh units were priced at $US3000 and $US3500 respectively (plus installation), total cost is expected to be closer to AU$9,500 – $10,000 due to buying the inverter, shipping and installation in Australia.

Aside from being a revolution on how households can become more self sustaining energy prosumers, the battery storage system will also offer Australian utilities – both retailers and networks – the opportunity to develop new business models. But effectively, they have no choice. Tesla’s battery pack won’t allow you to quit the grid just yet, but it does put a bomb under need to transform our uni-directional dumb grids.

Morgan Stanley estimate AGL and Origin could see earnings (EBIT) reductions of around $30-$40m in FY17, rising to $90-$100m in FY20 based on solar plus batteries driving a cumulative customer load shedding approaching approximately 800GWh for each company and 3000GWh in total for the east coast National Electricity Market. Morgan Stanley downgraded the tier 1 gentailers in light of the disruptive battery storage technology and values the potential Australian market at 2.4m Australian homes with battery storage.

Household solar and battery-market sizing

Household solar and battery-market sizing

Even if you could buy it, does it make sense?

Despite not having mass production set up to manufacture the product and the Gigafactory 1 to be completed by 2020, Tesla received $800m of orders (US$179m PowerWall, US$625m PowerPack) within 1 week of unveiling. In a feat that only Tesla could achieve, the new Powerwall and Powerpack batteries were sold out through 2016 in ten days from the announcement. Even Musk himself estimated that the Gigafactory 1 is not enough to supply demand and while there are plans to build Gigafactory 2 in Japan, the plans are nowhere near finalisation.

The answer is actually quite complicated for homeowners with solar power and depends on your lifestyle (usage habits) and where you live. “Tesla sees enormous potential for the Powerwall in markets like Hawaii, Germany, and Australia, where the price of electricity is significantly more expensive than the price a utility will pay a homeowner for excess solar production,” says Alexis Georgeson from Tesla. “In these markets today, the Powerwall can provide compelling economics.”

According to Morgan Stanley’s research, the key willingness-to-pay trigger points lie at cost levels which a Tesla Powerwall integrated with a solar system is not far off achieving (below $10,000 purchase price and below a 10-year payback). The survey finds that interest is around 30-35% of households at such a price point but then drops away to just less than 10% above this price. The paper also notes that if the installed price of batteries can be brought down to levels below $5000, comparable with a large television, and the product is perceived by consumers as ‘mainstream’ – as solar systems have achieved – then the battery market will open up further as customers apply less rigorous financial criteria to such a purchase (for example, the ‘keeping up with the Jones’ phenomenon).

The paper provides some indicative estimates of payback times for the 7 kilowatt-hour daily cycle Tesla Powerwall from it allowing households to use solar generation that would otherwise be exported to the grid at, say, 6 cents to offset consumption from the grid at various, far higher retailer rates. The table above details these estimates by each network distribution area and the big three power retailers. Queensland and South Australia stand out as the most attractive, slipping in below the key 10-year payback threshold (red is most favourable).

 

Estimated payback on batteries across the NEM

Estimated payback on batteries across the NEM

As the price of solar keeps plummeting, the additional cost of a battery for backup might seem fairly small. Paying an extra 20%-25% and we can guarantee energy security, as backup power, from outages could be pretty attractive to many households and companies using the commercial-size batteries to prevent outages.

Sources: RenewEconomy, Tesla, BusinessSpectator,

Koh, Baker, Martin, Goodridge and Markiewicz of Morgan Stanley – Australia Utilities Asia Insight: Household Solar & Batteries – Battery Costs & Potential Contenders

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