The grid will not be disrupted: why Tesla’s Powerwall won’t catalyze a solar revolution

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power cable and wind turbines in county Kerry ,Ireland (photo final gather)

power cable and wind turbines in county Kerry ,Ireland (photo final gather)

When Tesla Motors debuted the Powerwall home storage battery at a glitzy launch at the end of April, the press and blogosphere hailed CEO Elon Musk as the inventor of the Holy Grail of renewable energy storage – and the nail in the coffin for the centralized grid. But does all the messianic talk of battery-powered “disruption” and solar triumphalism stack up? Hardly. For all their ballyhooed price reductions, Tesla batteries are still too unreliable and expensive to come even within hyping distance of either a reliable power supply or an off-grid revolution, writes Will Boisvert.

The announcement of Tesla Motor’s cheap new lithium-ion storage batteries set the renewable energy world on its ear. Breathless commentators pronounced them a revolutionary advance heralding cheap, ubiquitous electricity storage that would make solar power a 24/7-power source for the masses. Elon Musk, Tesla’s wunderkind CEO, fed these hopes at the glitzy product launch for the 10 kilowatt-hour (KWh) Powerwall home storage battery.

“You could actually go, if you want, completely off the grid,” he told them. “You can take your solar panels, charge the battery packs, and that’s all you use.”

The average retail price of residential grid electricity in the United States is 12.3 cents-per-kWh. Tesla battery power costs more than that just for the storage

Powerwalls would let developing countries “leapfrog” straight to a solar-plus-storage electricity system, he explained, and the 100-kWh utility-scale Powerpack version would have a world-historical effect. Just 160 million Powerpacks would suffice to “transition” the United States to “sustainable energy,” he said, adding, “With 900 million [Powerpacks] you can…make all the electricity generation in the world renewable — and primarily solar.”

But does all the messianic talk of battery-powered “disruption” and solar triumphalism stack up? Hardly. For all their ballyhooed price reductions, Tesla batteries are still way too feeble and expensive to come even within hyping distance of either a reliable power supply or an off-grid revolution.

On cost, the average residential retail electricity prices in the US are $0.12 per kWh, while electricity from Tesla’s Powerwall on paired rooftop solar would cost 30 c/kWh or more. Given that 80 percent of pre-orders for Tesla’s batteries are for the utility-scale Powerpack, not the residential Powerwall, battery storage will likely benefit big baseload power plants (the grid) more than solar homeowners. And no matter the staggering cost, battery storage cannot solve the problems of integrating unreliable wind and solar power into the electricity system. In fact, Tesla’s batteries spotlight just how deep and intractable those problems remain.

1.

In the wake of Musk’s announcement, many in the press and blogosphere hailed Musk for discovering the Holy Grail of renewable energy storage — and for slaying two of the most loathed pariahs in green energy doctrine: nuclear power and the centralized grid. Citing antinuclear activist Arnie Gundersen, Forbes writer Jeff McMahon asked readers, “Did Tesla Just Kill Nuclear Power?” Ecologist editor Oliver Tickell promptly affirmed that, indeed, “Tesla’s Battery Just Killed Nuclear Power” — and McMahon later explained “Why Tesla Batteries are Cheap Enough to Prevent New Power Plants.”

Gizmodo purred that “another attractive part for consumers is that this kind of battery will give homeowners complete energy independence, allowing them to sever connections to utility companies.” An article on the investment website Seeking Alpha warned, “Energy storage will likely make the utilities’ grid infrastructures unnecessary in the long run” and decreed that “utilities either work with distributed solar companies or face complete collapse.”

After the first flush of celebration, a closer look at the specs has started undermining the claims of Tesla and its admirers. Contrary to Musk, you would be ill advised to go off the grid with solar panels and batteries. The 10-kWh Powerwall stores enough electricity to supply an average American home, which uses 30 kWh of electricity per day, for all of 8 hours; a day of overcast weather would leave an off-grid solar-plus-Powerwall system without any power at all. And the 10 kWh system can only cycle — charge up with electricity and then discharge — about once per week; it’s designed as a back-up for grid outages, not to store daily household solar generation.

For daily cycling you need the Powerwall’s smaller 7-kWh version. Buy four of those and you would have enough storage to last 24 hours — but a single cloudy day would leave the system as dead as a doorknob. As would a modest strain on the battery: the Powerwall can provide 2 kilowatts (kW) of steady power or 3.3 kW of peak power, which means that if you use it to run a clothes dryer, you’ll have to turn off every other electricity load in the house.

You’ll also pay a lot. Tesla sells the 10-kWh Powerwall for $3,500 wholesale. Inverters and installation roughly doubles that price: the solar installer SolarCity, a Tesla sister company (Musk chairs its board), is selling it for $7,140 retail. A similar outlay will buy you a much more functional gas backup generator that runs steadily regardless of the weather. The workhorse 7-kWh version of the Powerwall sells wholesale for $3,000, perhaps $5,000 installed. Multiply that price by a large number if you want an off-grid storage system that can sustain you through, say, a winter week of cold and cloud.

Like every aspect of electricity supply, storage works best with generators that are big, reliable, networked, and controllable

Even if you don’t go off-grid, electricity stored in a Powerwall is a financial drain. The costs depend on the battery’s lifespan — the number of times it can cycle — and “depth of discharge.” (Discharging all the electricity in a battery reduces the cycles it can produce.) The company has been tight-lipped about these parameters, but Musk has estimated calendar lifespans of about 15 years (they are under warranty for 10 years) and 5,000 cycles for the 7-kWh Powerwall. That works out to a storage cost of perhaps 14 cents-per-kWh (assuming a maximum 100 percent depth-of-discharge, which is doubtful, and ignoring the electricity the battery wastes as it cycles).

Those prices can’t compete against the grid that Tesla is supposed to bankrupt. The average retail price of residential grid electricity in the United States is 12.3 cents-per-kWh. Tesla battery power costs more than that just for the storage. Add in the price of generating rooftop solar power to charge the Powerwall, and the total price of Tesla stored electricity will easily add up to 30 cents-per-kWh, and often more. Storing daytime solar power at 30 cents to replace nighttime grid electricity costing 12 cents is a losing proposition.

It’s also a dud even for homeowners with existing solar systems because of net metering and feed-in tariff schemes that pay them to sell surplus power back to the grid. In California, rooftop PV exported to the grid can earn up to 32 cents-per-kWh, which would put the opportunity cost of storage at close to 50 cents-per-kWh. Price hurdles like these are why SolarCity is not even offering the 7-kWh Powerwall except in Hawaii, where residential electricity costs 31 cents-per-kWh because the grid runs on expensive imported oil.

That calculus may change because of government subsidies, quotas, and rate regulations. California’s Self-Generation Incentive Program rebates up to 60 percent of the capital cost of electricity storage systems; Tesla stands to harvest $65 million in California subsidies by installing batteries for commercial customers like Walmart. A new state requirement that utilities install 1.325 gigawatts of storage (gigawatt-hours not specified) will drive further sales of Tesla’s large Powerpack assemblages there. California may also shift its retail electricity rates to a “time-of-use” (TOU) structure that charges residences much more during late afternoon-evening hours of peak demand than at other times, a rate structure that encourages battery storage.

In some of these TOU schemes the difference in rates between solar noon and 6 p.m. can be as high as 17 cents-per-kWh, roughly break-even for Powerwall storage. The spread between nighttime “super off-peak” rates of 11 cents and peak rates could be even bigger, up to 24 cents. That raises the prospect of non-solar homes buying batteries so they can store grid power at night to subsist on — or sell back to the grid — in the afternoon peak. (Elon Musk’s brother Kimbal suggested just such a use for the Powerwall.)

More than the romance of the solar homesteader living in blissful isolation from the grid, this is the idea that entrances battery visionaries: a system of countless household proprietors trading electricity, storing it low and selling it high, savvily arbitraging gluts and shortfalls, smoothing out the gaps and peaks in the grid while driving it towards perfect efficiency.

But there are pitfalls in that model. A successful business case for battery storage is predicated on policies that entrench high electricity prices and wide price spreads. California’s electricity rates are 40 percent higher than the American average and going up, thanks to the state’s aversion to anything that looks like a reliable power plant that might ease supply constraints. To thrive, stored solar electricity will rely on a regulated environment of inadequate infrastructure and energy austerity.

And there’s a more fundamental contradiction in battery populism: if solar homeowners can use batteries to store low and sell high, so can power plants. Indeed, they can do it cheaper. Priced at $250 per kilowatt-hour, 40 percent below the cost of a home Powerwall, Tesla’s utility-scale Powerpack batteries already make the cost of storage much lower for a power plant than for a solar homeowner. (Tom Randall of Bloomberg News calculated that about 80 percent of Tesla’s pre-orders are for the Powerpack, not the household Powerwall.)

The numbers show that Musk’s vision of an electricity system of intermittent renewable power backed up by batteries is a pipe dream

In the competition to store low and sell high, baseload power plants, nuclear plants included, would dominate. While a solar producer, whether a rooftop PV rig or a utility-scale farm, could arbitrage the rate spread between solar noon and 6 p.m. peak — provided the sun is out! — a nuclear plant could arbitrage the much wider spread between storing electricity at dirt-cheap nighttime rates and selling at peak rates, whether rain or shine. (No, solar homeowners won’t escape grid transmission costs unless they go completely off-grid. That’s next to impossible, as we’ve seen, and it would also prevent them from arbitraging grid prices.) If storage really catches on in an unbiased electricity market, there will be no huge rate differentials to fund mom-and-pop battery costs, no arbitrage opportunities that have not already been picked clean by the centralized grid.

The grid’s big power plants get that edge from humdrum advantages — economies of scale and expertise; pooled resources; the ability to control generation — that distributed and weather-dependent generators cannot replicate. Batteries won’t bridge that gap. Like every aspect of electricity supply, storage works best with generators that are big, reliable, networked, and controllable.

2.

If the microeconomics of distributed solar-plus-storage look bleak, what about the macro-scale potential of battery storage to usher in the renewable millennium? Can batteries transform intermittent wind and solar power into reliable energy sources for a comprehensive decarbonization of the grid? Will billions of Powerpacks transition the world to an all-renewable energy supply? The answer, unfortunately, is no. The broad strokes of Musk’s battery vision are even less convincing than the details.

Battery storage can certainly play a useful role in the grid. It can, for example, help smooth out moment-to-moment power fluctuations as gusts and lulls ripple across wind farms. Because batteries react in a split second, they can displace much larger amounts of slower-ramping fossil-fired “spinning reserves” — usually gas plants — that normally perform this balancing function, and thus help stabilize the grid against the short-term jolts that are increasingly caused by intermittent renewables. But momentary fluctuations are just the tip of the iceberg of unreliability that batteries would have to bridge in firming up a grid composed mainly of intermittent solar and wind power. Surges and slumps of intermittent power persist for months and across hemispheres, and even a fantastic overbuild of batteries would not be enough to accommodate them.

Consider the 160 million Powerpacks that Musk thinks would transition the US grid to solar and wind, a total of 16 terawatt-hours (trillion watt-hours) of storage. That’s several quantum leaps in storage capacity — but still only a drop in the nation’s gargantuan electricity bucket. America used about 4,100 terawatt-hours (TWh) of electricity last year, so those Powerpacks would be able to backstop a hypothetical all-intermittent American electricity supply for all of 34 hours. (That’s assuming average weather; during a heat wave or cold snap electricity demand would be much higher and the batteries might drain much faster.) The price of the Powerpacks by themselves, installation not included, would be $4 trillion. Want to extend that to two days’ worth of battery power? Throw another $1.6 trillion on the fire. And hope those two days will cover every weather scenario that depresses intermittent generation and hikes demand; otherwise there will be blackouts across the continent.

To see how forlorn a hope that is, we need only look to the voluminous data on Germany’s renewable energy system. Germany’s intermittent power slumps are epic: total output for its wind and solar sectors combined can plummet to less than 5 percent of rated nameplate capacity for an entire week, and even lower for two- and three-day stretches. So let’s look at last year’s stats to see just how much battery storage Germany would have needed to back up its intermittent renewables sector during slumps.

Rather than ask batteries to cope with every supply-and-demand scenario, let’s hold them to the lower standard of simply making up the gap between average wind and solar generation and the reduced generation during slumps. In 2014, Germany’s wind and solar sectors produced a total of 90.9 TWh of electricity, for a daily average of 249 gigawatt-hours (GWh) and a weekly average of 1,748 GWh. According to data from Germany’s Fraunhofer Institute, the lowest daily production of wind and solar power came on January 21, 2014, when their combined generation was 22 gigawatt-hours. To top up that figure to the daily average would have required 227 GWh of Powerpack storage, costing $56 billion. If we were also to ask a battery system to store the largest daily surplus of intermittent generation above the average (on March 16, when wind and solar produced 580 GWh), that would require 331 GWh costing $83 billion.

It’s great that Elon Musk is making better batteries. Let’s think harder about how to use them

But wind and solar droughts last much longer than a day. According to Fraunhofer data, the deepest weekly slump occurred in Week 47 (November 17-23) when intermittents together produced 770 GWh. Compensating for that deficit below average production would have required 978 GWh of Powerpack storage costing $244 billion. But then after Week 48’s slight deficit, during which no net charging would have been possible, the batteries would have been completely empty for Week 49’s renewed drought, when a deficit almost as deep, 958 GWh, opened up. The batteries would not have made it through Week 47 anyway, because Week 46, with its deficit of 798 GWh, would have largely drained them before Week 47 even began. If it had had to rely on batteries to back up its wind and solar sectors, Germany would have endured a month of rolling blackouts.

These figures are for Germany’s current wind and solar sectors, which contribute just 15 percent of the country’s electricity production. The costs would rise dramatically for higher penetrations of intermittent power. At a modest penetration of 30 percent, one week of Powerpack storage — still woefully inadequate — would cost about $500 billion dollars. That’s just the (uninstalled) cost of the batteries, which will generate not one electron of low-carbon energy; the wind and solar generators themselves would cost hundreds of billions more. And that entire battery infrastructure would have to be replaced every 15 years or so. To put these expenses in perspective, $500 billion spent on AP1000 reactors at a capital cost of $6,000 per-kilowatt would build 83 gigawatts of nuclear power, enough to decarbonize Germany’s entire electricity supply for 60 years and more.

3.

The numbers show that Musk’s vision of an electricity system of intermittent renewable power backed up by batteries is a pipe dream. Even colossal investments in battery storage will not reduce the system’s dependence on a full-sized “grid battery” of dispatchable power plants whose costs — and ongoing carbon emissions — should be added to the tab of the wind and solar generators that rely on them.

There will be no leapfrogging to distributed solar; if developing countries want to escape perennial energy austerity and insecurity, they will have to deploy grid power plants as fast as they do solar panels and Powerwalls. Batteries don’t make intermittent power cheap and feasible, they make it immensely costly and only marginally more useful. The falling price of wind and solar generators has distracted us from the external costs of trying to shape them into an energy source we can count on. Musk’s coup inadvertently reveals just how steep those costs remain.

A rational energy storage scheme will emphasize not solar systems that store during periods of high daytime demand to service somewhat higher evening demand, but low-carbon baseload plants that reliably store when nighttime demand is very low

The real disappointment in this episode is how advances in energy storage are being shunted down a blind alley by green ideological obsessions. If it comes a long way down in price, battery storage on a significant scale may someday play an appreciable role in meeting peak demand without fossil-fired generation. To accomplish that, a rational energy storage scheme will emphasize not solar systems that store during periods of high daytime demand to service somewhat higher evening demand, but low-carbon baseload plants that reliably store when nighttime demand is very low. That scheme would use storage to augment the potential of nuclear plants, not as a rod to beat them with. It would understand the enduring value of the power grid, that triumph of collective provisioning, rather than trying to tear it down. It’s great that Elon Musk is making better batteries. Let’s think harder about how to use them.

Editor’s Note

boisvert_v3Will Boisvert writes on energy, environmental, and urban policy for The New York Observer, Dissent, and other publications. This article was first published by The Breakthrough Institute and is republished here with permission.

Comments

  1. says

    Using the vernacular, I’d agree with the writer that much of the talk surrounding Musk’s powerwall is a load of cobblers, in the context of the USA. However, having had a look at the Breakthrough Institute web site and gone through the article above, I part company with the writer in a number of areas. Picking one example:

    “There will be no leapfrogging to distributed solar; if developing countries want to escape perennial energy austerity and insecurity, they will have to deploy grid power plants as fast as they do solar panels.”

    Nonsense. Taking the example of sub-saharan Africa (a rather sunny place – insolation north of 1500kWhrs/kWp/year with implications for LCOEs – sub 5eurocents) the locals in this location want power for: light (= LEDs), refrigeration and to recharge their mobiles i.e. they have modest power requirements that can easily be served by PV and modest storage (micro-grids). There are a number of companies (with no gov’ support) already providing this – profitably (to some of the poorest people on the planet who incidentally are happy to pay 25ecents/kWhr for modest amounts of elec.).

    Large power plants + power network = time (& lots of brown envelopes). You can do it quicker (& much cheaper) with PV and some storage (and for some odd reason the brown envelopes tend to be absent – funny that).

    In the case of Germany the writer erects straw men with respect to the number of batts needed to back up RES. Residential elec’ costs around 30eurocents/kWhr. PV and batteries could provide power for between 20 and 25ecents/kWhr which suggests some sort of business case. An analysis of 1 year’s worth of daily load and PV data suggests that a 10kWhr unit (does not need to be a Musk system) could meet around 65% to 70% of HH demand – over a year (German homes use in the range 2.5 to 5MWhrs/year i.e. 7 to 14kWhrs/day). PV/Batt elec would be provided mostly spring – summer – autumn – although there would also be a modest contribution in winter.

    The move to an all-RES system is a journey – HH PV with batts could be part of that journey and provide a partial solution. Anybody that thinks otherwise is a halfwit.

    In terms of back-up to RES, plenty of solutions out there – no need to focus on storage (which I agree can smooth out hour to hour variations with quite small amounts). However, since I ain’t in the education game, I’ll leave those bright people at the Breakthrough Institute to find out for themselves. Have a nice day y’all.

    • James says

      Mike says:

      PV and batteries could provide power for between 20 and 25ecents/kWhr which suggests some sort of business case.

      Do you mind showing us the math?

    • Will Boisvert says

      @ Mike Parr,

      Thanks for your comments

      1. Sub-Saharan Africa has “modest power requirements” because people there live in desperate poverty and underdevelopment. If they develop economically, they will have large power requirements, just like other developed countries, which solar and batteries cannot begin to meet.

      Solar and batteries can sometimes supply the small output needed by LEDs and cell-phone chargers. (Refrigeration in the tropics is a question mark, given the Tesla’s feeble power output.) But during periods of prolonged cloud cover the batteries will drain and fall short of even minimal lighting and recharging needs, let alone the vast generation a developing country will need for industry, transport, water systems, etc. PV and batteries are better than nothing (although too expensive for most Africans), but they cannot substitute for the reliable grid power needed by a developing economy.

      2. As for Germany, you forgot to provide references to support your cost estimates, but let’s assume you are correct. The comparison between distributed solar-plus-battery costs at 20-25 cents per kwh versus grid power at 30 cents per kwh is misleading because the latter includes huge overhead costs for grid transmission and distribution, for the centralized power plants that supply the grid when solar and batteries cannot, and for high taxes and renewable surcharges.

      None of those “grid costs” go away when you add distributed solar plus batteries, because the grid is still essential to the electricity system. By your own account, distributed solar-plus-batteries could supply only 65-70 percent of household needs. If solar households are not to go dark for weeks on end during the winter, the grid has to be there to supply them, so grid costs will have to be paid.

      Those costs are currently charged on a per-kwh basis but that will change as distributed solar grows. Grid costs are mainly overhead; it costs no less to supply solar households with the grid infrastructure they rely on, even if their consumption of grid kilowatt-hours is lower. Solar households will therefore have to pay an equal share of grid costs. This is starting to happen in Germany and elsewhere; for example, the German government has proposed assessing a portion of the renewables surcharge to previously exempt distributed self-generation. (In essence, distributed solar will have to pay a tax to fund wind farms and biomass plants that feed the grid.)

      Distributed solar currently gets a big and unjustified break on grid costs, but once these are properly accounted it will become clear that a system based on distributed solar-plus-battery still costs much more than conventional grid power, even in Germany.

      • hans says

        Living in Germany I can confirm that grid electricity costs about 30$cents per kWh.

        “The comparison between distributed solar-plus-battery costs at 20-25 cents per kwh versus grid power at 30 cents per kwh is misleading because the latter includes huge overhead costs for grid transmission and distribution, for the centralized power plants that supply the grid when solar and batteries cannot, and for high taxes and renewable surcharges.”

        That may all be true, but it has no influence on the business case of solar with storage. For households in Germany self-consumed electricity is treated (and should be treated) as a form of energy savings. Both in the case that you get a more efficient refrigerator and in the case you buy a small PV system with storage you will be buying less electricity from the grid and thus don’t pay the taxes and grid costs.

  2. Phil says

    Good analysis using current figures, but you forget to account for the continued falling costs of both solar and battery storage technology, increased efficiency, plus the fact that even in Germany only a fraction of the population has solar installed on the roof.

    Musk actually mentioned this in his keynote.

    So if solar really did ramp up to each and every roof (which isn’t actually necessary) then there would actually be an oversupply at all times even on a cloudy day with batteries keeping the lights on at night.

    Nobody thought that solar would drop to the current rates so quickly and those falls are just as likely to continue. Similarly battery technology such as Tesla’s is just in its infancy and the economics of the Gigafactory in Nevada will continue to push that down, along with open patents and a huge ramp in supply, the costs will plummet and the economics of the entire solution will far outstrip even the cheapest grid power.

    So accounting for all this, the analysis presented in this article is correct now, but will be outdated and irrelevant in a very short timeframe.

  3. florent says

    I stopped reading after clicking on your link “30kWh a day” and reading this: “In 2013, the average annual electricity consumption for a U.S. residential utility customer was 10,908 kilowatthours (kWh), an average of 909 kWh per month”. Thanks

    • Will Boisvert says

      Florent, I don’t understand your comment.

      909 kwh average use during a 30-day month works out to about 30 kwh average use per day, exactly as I wrote.

  4. says

    If there were any durable business case for home energy storage, the German State of Bavaria would be encouraging its citizens to invest in the necessary technologies in order to block the construction of highly controversial transmission lines carrying wind power from the North Sea to the Alps. Instead, the ruling Christian Socialists (CSU) joined with the remaining federal coalition parties on July 1st to endorse a new CO2 reduction policy that would transform some of the country’s oldest lignite power plants into a strategic reserve that could be reactivated during times of electricity supply deficiency. In effect, the government is relying on the solar energy that was stored in lignite millions of years ago to bridge future supply gaps. It should be noted that Germany’s pumped storage power stations have largely fallen into disuse, since there is generally too much power on the grid owing to four times the renewable generation capacity compared with lignite power plants (http://www.energypost.eu/quo-vadis-rwe-power-giants-struggle-energiewende/). I once calculated the immense amount of electrical power that would be provided to the grid by just one inch of rain falling on the Goldisthal pumped storage basin. Tesla should let us know how long it would take to render this precipitation superfluous by installing their Powerwalls. At present, the clouds reducing the output of Germany’s solar installations are helping to compensate for that power loss with greater amounts of rain.

  5. Chikoma Kazunga says

    A very good piece of analysis Will and your points are valid if you consider certain geographies and current costs of solar PV and storage. In parts of the World that experience more than 250 days of intense sunshine a year and that also don’t have grid power (many parts of Africa) or very expensive grid power (the Caribbean, many parts of Africa), solar PV plus storage has the potential (and already is in certain markets) to be significantly cheaper than the next best alternative – a diesel powered generator. This is really where solar PV plus storage can and should make its mark. In these markets, fossil-fueled power generation can function as a backup to the solar PV plus storage and the economics make sense to do it that way. If solar PV plus storage costs continue to fall, as they have over the last few years, then the business case just gets stronger. In many parts of the World, primarily the developed world, the notion of wholesale grid migration in favour of freestanding solar PV and storage is a real head scratcher – it just doesn’t make sense from a security of supply or cost standpoint.

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