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Is Tesla toast? A provocative work on energy storage

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  • Is Tesla toast? A provocative work on energy storage

    I find the following work very interesting. Reference to a very disputed topic here, Tesla's economics, just to attract readers. However the possibilities being studied have really a lot to do with Tesla's future.
    SG

    Why Energy Storage is About to Get Big – and Cheap


    Posted on April 14, 2015 by Ramez Naam
    tl;dr: Storage of electricity in large quantities is reaching an inflection point, poised to give a big boost to renewables, to disrupt business models across the electrical industry, and to tap into a market that will eventually top many of tens of billions of dollars per year, and trillions of dollars cumulatively over the coming decades.
    Update: My assessment of the Tesla Powerwall Battery. It’s a big step towards disruption.
    The Energy Storage Virtuous Cycle

    I’ve been writing about exponential decline in the price of energy storage since I was researching The Infinite Resource. Recently, though, I delivered a talk to the executives of a large energy company, the preparation of which forced me to crystallize my thinking on recent developments in the energy storage market.
    Energy storage is hitting an inflection point sooner than I expected, going from being a novelty, to being suddenly economically extremely sensible. That, in turn, is kicking off a virtuous cycle of new markets opening, new scale, further declining costs, and additional markets opening.
    To elaborate: Three things are happening which feed off of each other.
    1. The Price of Energy Storage Technology is Plummeting. Indeed, while high compared to grid electricity, the price of energy storage has been plummeting for twenty years. And it looks likely to continue.
    2. Cheaper Storage is on the Verge of Massively Expanding the Market. Battery storage and next-generation compressed air are right on the edge of the prices where it becomes profitable to arbitrage shifting electricity prices – filling up batteries with cheap power (from night time sources, abundant wind or solar, or other), and using that stored energy rather than peak priced electricity from natural gas peakers.This arbitrage can happen at either the grid edge (the home or business) or as part of the grid itself. Either way, it taps into a market of potentially 100s of thousands of MWh in the US alone.
    3. A Larger Market Drives Down the Cost of Energy Storage. Batteries and other storage technologies have learning curves. Increased production leads to lower prices. Expanding the scale of the storage industry pushes forward on these curves, dropping the price. Which in turn taps into yet larger markets.



    Let’s look at all three of these in turn.
    1. The Price of Energy Storage is Plummeting

    Lithium Ion

    Lithium-ion batteries have been seeing rapidly declining prices for more than 20 years, dropping in price for laptop and consumer electronic uses by 90% between 1990 and 2005, and continuing to drop since then.
    A widely reported study at Nature Climate Change finds that, since 2005, electric vehicle battery costs have plunged faster than almost anyone projected, and are now below most forecasts for the year 2020.

    The authors estimate that EV batteries in 2014 cost between $310 and $400 per kwh. It’s now in the realm of possibility that we’ll see $100 / kwh lithium-ion batteries in electric vehicles by 2020, with some speculating that Tesla’s ‘gigafactory’ will push into sufficient scale to achieve that.
    And the electric car market, in turn, is making large-format lithium-ion batteries cheaper for grid use.
    What Really Matters is LCOE – the Cost of Electricity

    Now let’s digress and talk about price. The prices we’ve just been talking about are capital costs. Those are the costs of the equipment. But how does that translate into the cost of electricity? What really matters when we talk about energy storage for electricity that can be used in homes and buildings is the impact on Levelized Cost of Electricity (LCOE) that the battery imposes. In other words, if I put a kwh of electricity into the battery, and then pull a kwh of electricity out, over the lifetime of the battery (and including maintenance costs, installation costs, and all the rest), what did that cost me?
    Traditional lithium ion-batteries begin to degrade after a few hundred cycles of fully charging and fully discharging, or 1,000 cycles at most. So naively we’d take the capital cost of the battery and divide it by 1,000 to find the cost per kwh round-tripped through it (the LCOE). However, we also have to factor in that some electricity is lost due to less than 100% efficiency (Li-ion is perhaps 90% efficient in round trip). This multiplies our effective cost by 11%.
    So we’d estimate that at the following battery prices we’d get the following effective LCOEs:
    - $300 / kwh battery : 33 cent / kwh electricity storage
    - $200 / kwh battery : 22 cent / kwh electricity storage
    - $150 / kwh battery : 17 cent / kwh electricity storage
    - $100 / kwh battery : 11 cent / kwh electricity storage
    All of those battery costs, by the way, are functions of what the ultimate buyer pays, including installation and maintenance.
    For comparison, wholesale grid electricity in the US at ‘baseload’ hours in the middle of the night averages 6-7 cents / kwh. And retail electricity rates around the US average around 12 cents per kwh. You can see why, at the several hundred dollars / kwh prices of several years ago, battery storage was a non-starter.
    On the Horizon: Flow Batteries, Compressed Air

    Right now, most of the talk about energy storage is about lithium-ion, and specifically about Tesla, who appear close to announcing a new home battery product at what appears to be a price of around $300 / kwh.
    But there are other technologies that may be ultimately more suitable for grid energy storage than lithium-ion.
    Lithium-ion is compact and light. It’s great for mobile applications. But heavier, bulkier storage technologies that last for more cycles will be long-term cheaper.
    Two come to mind:
    1. Flow Batteries, just starting to come to market, can theoretically operate for 5,000 charge cycles or more. In some cases they can operate for 10,000 cycles or more. In addition, the electrolyte in a flow battery is a liquid that can be replaced, refurbishing the battery at a fraction of the cost of installing a new one.
    2. Compressed Air Energy Storage, like LightSail Energy’s, uses physical components that are likewise rated for 10,000+ cycles of compression and decompression.
    Capital costs for these technologies are likely to be broadly similar to lithium-ion costs over the long term and at similar scale. Most flow battery companies have $100 / kwh capital cost as a target in their minds or one that they’ve publicly talked about. (ARPA-E has used $100 / kwh as a target.) And because a flow battery or compressed air system lasts for so many more cycles, the overall cost of electricity is likely to be many times lower.
    How low? At this point, other variables begin to dominate the equation: The cost of capital (borrowing or opportunity cost); management and maintenance costs; siting costs.
    DOE’s 2013 energy storage roadmap lists 20 cents / kwh LCOE as the ‘short term’ goal. It articulates 10 cents / kwh LCOE as the ‘long term’ goal.
    At least one flow battery company, EnerVault, claims that it is ‘well below’ the DOE targets (presumably the short term target of 20 cents / kwh of electricity).
    [Update: I'm informed that EnerVault has run into financial difficulties, a reminder that the storage market, like the solar market before it, will likely be fiercely Darwinian. In solar, the large majority of manufacturers went out of business, even as prices plunged by nearly 90% in the last decade. We should expect the same in batteries. The large majority of energy storage technology companies will go out of business, even as prices drop - or perhaps because of plunging prices - in the decade ahead.]
    Getting back to fundamentals: In the long run, given the advantage of long life, if flow batteries or compressed air see the kind of growth that lithium-ion has seen, and thus the cost benefits of scale and learning curve, it’s conceivable that a $100 / kwh flow battery or compressed air system could reach an LCOE of 2-4 cents / kwh of electricity stored.
    Of course, neither flow batteries nor compressed air are as commercially proven as lithium-ion. I’m sure many will be skeptical of them, though 2015 and 2016 look likely to be quite big years.
    Come back in a year, and let’s see.
    2. Storage is on the Verge of Opening Vast New Markets

    Now let’s turn away from the technology and towards the economics that make it appealing. Let’s start with the simplest to understand: in the home.
    A. Fill When Cheap, Drain When Pricey (Time of Use Arbitrage)

    The US is increasingly going to time-of-use charges for electricity. Right now that means charging consumers a low rate in the middle of the night (when demand is low) and a high rate in the afternoon and early evening (when demand is at its peak, often twice as high as the middle of the night).
    This matches real underlying economics of grid operators and electricity producers. The additional electricity to meet the surge in afternoon and early evening is generally supplied by natural-gas powered “peaker” plants. And these plants are expensive. They only operate for a few hours each day, so their construction costs are amortized over a smaller amount of electricity. And they have other problems we’ll come back to shortly. The grid itself pays other costs for the peak of demand. Everything – wires, transformers, staff – must be built out to handle the peak of capacity, not the minimum or the average.
    The net result is that electricity in the afternoon and early evening is more expensive, and this is (increasingly) being passed on to consumers. How much more expensive? See below:

    In California, one can choose the standard tiered rate of 18.7 cents per kwh. Or one can choose the the time-of-use rate. In the latter, there’s a 19.2 cent per kwh difference in electricity rates between the minimum (9pm to 10am) and the peak (1pm – 7pm).
    Batteries cheaper than 19 cents / kwh LCOE (including financing, installation, etc.) can be used to arbitrage this price difference. Software fills the battery up with cheap power at night. Software preferentially uses that cheap power from the battery during the peak of demand, instead of drawing it from the grid.
    This leads to what seems to be a paradoxical situation. A battery that is more expensive than the average price of grid electricity can nonetheless arbitrage the grid and save one money. That’s math.
    That’s also presumably one of the scenarios behind Tesla’s entry into the home battery market, though it’s unlikely to be explicitly stated.
    One last point on this before moving on. The arbitrage happening here is also actually good for the grid. From a grid operator’s standpoint, this is ‘peak shaving’ or ‘peak shifting’. Some of the peak load is being diverted to another time when there’s excess capacity in the system. The total amount of electricity being drawn doesn’t change. (In fact, it goes up a bit because battery efficiency is less than 100%). But it’s actually a cost savings for the grid as a whole. In any situation where electricity demand is growing, for instance, widespread use of this scenario can postpone the data at which new distribution lines need to be installed.
    B. Store the Sun (Solar + Batteries, as Net Metering Gets Pressured)

    Rooftop solar customers love net metering, the rules that allow solar-equipped homes to sell excess electricity back to the grid. Yet around the world and the US, net metering is under pressure. It’s likely, in the US, that the rate at which consumers are paid for their excess electricity will drop, that caps will be imposed, or both.
    The more that happens, the more attractive batteries in the home look.
    Indeed, it’s happening in Germany already, and the economics there are revealing.
    First, let’s be clear on the scenarios, with some help from some graphics from a useful Germany Trade and Invest presentation (pdf link) that dives into “battery parity” (with some tweaks to the images from me.)
    Current scenario: Excess power (the bright orange bit – electricity solar panels generate that is beyond what the home their own needs) is sold to the grid. Then, in the evening, the home need power. It buys that electricity from the grid.

    Potential new situation. Excess power is available during the day. At least some of it gets stored in a battery for evening use.

    Under what circumstances would the second scenario be economically advantageous over the first? In short: The difference in price between grid electricity and the net metering rate / feed-in-tariff is the price that batteries have to meet. In Germany, where electricity is expensive, and feed-in-tariffs have been plunging, this gap is opening wide.

    There’s now roughly a 20 euro cent gap between the price of grid electricity and the feed-in-tariff for supplying excess solar back to the grid (the gold bands) in Germany, roughly the same gap as exists between cheapest and most expensive time of use electricity in California.
    GTAI and Deutsche Bank’s conclusion – based on the price trends of solar, batteries, electricity in Germany, and German feed-in-tariffs – is that ‘battery parity’, the moment when home solar + a lithium-ion battery makes economic sense, will arrive in Germany by next summer, 2016.

    Almost any sunny state in the US that did away with net metering would be at or near solar + battery parity in the next 5 years.
    Tesla’s battery is almost cheap enough for this. In fact, it makes more economic sense in Germany than in the US.
    Note: Solar + a battery is not the same as ‘grid defection’. It’s not going off-grid. We’re used to 99.9% availability of our electricity. Flick a switch and it’s on. Solar + a small battery may get someone in Germany to 70%, and someone in Southern California to 85%, but the amount of storage you need to deploy to increase that reliability goes up steeply as you approach 99.99%.
    For most of us, the grid will always be there. But it may be relegated to slightly more of a backup role.
    C. Storage as a Grid Component (Caching for Electrons)

    Both of the previous scenarios have looked at this from the standpoint of installation in homes (or businesses – the same logic applies).
    But the dropping price of storage isn’t inherently biased towards consumers. Utility operators can deploy storage as well, Two recent studies have assessed the economics of just that. And both find it compelling. Today. At the price of batteries that Tesla has announced.
    First, Texas utility Oncor commissioned a study (pdf link – The Value of Distributed Electricity Storage in Texas) of whether it would be cost-effective to deploy storage throughout the Texas grid (called ERCOT), placing the energy storage at the ‘edge’ of the grid, close to consumers.
    The conclusion was an overwhelming yes. The study authors concluded that, at a capital cost of $350 / kwh for lithium-ion batteries (which they expected by 2020, but which Tesla has already beaten), it made sense across the ERCOT region to deploy at least 15,000 MWh of battery storage. (That would be 15 million KWh, or the equivalent battery capacity of nearly 160,000 Tesla model 85Ds.)
    The study authors concluded that this additional battery storage would slightly lower consumer electrical bills, reduce outages, reduce the need to build added capacity (by shifting the peak, much as a home battery would), and similarly reduce the need to build additional transmission and distribution lines.

    The values shown above are in megawatts of power, by the way. The assumption is that there are 3 MWh of storage per MW of power output in the storage system.
    You can also see that at a slightly lower price of storage than the $350 / kwh assumed here, the economic case for 8,000 MW (or 24,000 MWh) of storage becomes clear. And we are very likely about to see such prices.
    8,000 MW or 8 GW is a very substantial amount of energy storage. For context, average US electrical draw (over day/night, 365 days a year) is roughly 400 GW. So this study is claiming that in Texas alone, the economic case for energy storage is strong enough to motivate storage capacity equivalent to 2% of the US’s average power draw.
    ERCOT consumes roughly 1/11th of the US’s electricity. (ERCOT uses roughly 331,000 GWh / year. The US as a whole roughly 3.7 million GWh / year.) If similar findings hold true in other grids (unknown as of yet), that would imply an economic case fairly soon for energy storage capacity of 22% of US electric draw for 3 hours, meaning roughly 88,000 MW or 264,000 MWh.
    This is, of course, speculative. We don’t know if the study findings scale to the whole of the United States. It’s back of the envelope math. Atop that, the study itself is an analysis, which is not the same value as experience. Undoubtedly in deployment we’ll discover new things which will inform future views. Even so, it appears that there is very real value at unexpectedly high prices.
    Energy storage, because of its flexibility, and because it can sit in so many different places in the grid, doesn’t have to compete with wholesale grid power prices. It competes with the price of peak demand power, the price of outages, and the price of building new distribution and transmission lines.
    Which brings us to scenario 2D:
    D. Replacing Natural Gas Peakers

    The grid has to be built out to support the peak of use, not the average of use. Part of that peak is sheer load. Earlier I mentioned natural gas ‘peaker’ plants. Peaker plants are reserve natural gas plants. On average they’re active far less than 10% of the time. They sit idle, fueled, ready to come online to respond to peaking electricity demand. Even in this state, bringing a peaker online takes a few minutes.
    Peaker plants are expensive. They operate very little of the time, so their construction costs are amortized over few kwh; They require constant maintenance to be sure they’re ready to go; and they’re less efficient than combined cycle natural gas plants, burning roughly 1.5x as much fuel per kwh of electricity delivered, since the economics of investing in their efficiency hardly make sense when they run for so little of the time.
    The net result is that energy storage appears on the verge of undercutting peaker plants. You can find multiple articles online on this topic. Let me point you to one in-depth report, by the Electric Power Research Institute (EPRI): Cost-Effectiveness of Energy Storage in California (pdf).
    This report specifically looked at the viability of replacing some of California’s natural gas peaker plans.
    While the EPRI California study was asking a different question than the ERCOT study that looked at storage at the edge, it came to a similar conclusion. Storage would cost money, but the economic benefit to the grid of replacing natural gas peaker plants with battery storage was greater than the cost. Shockingly, this was true even when they used fairly high prices. The default assumption here was a 2020 lithium-ion battery price of $528 / kwh. The breakeven price their analysis found was $842 / kwh, three times as high as Tesla’s announced utility scale price of $250/kwh.

    Flow batteries, compressed air, and pumped hydro (where geography supports it) also were economically viable.

    California alone has 71 natural gas peaker plants, with a combined capacity of 7,418 MW (pdf link). The addressable market is large.
    3. Scale Reduces Costs. Which Increases Scale.

    In every scenario above there are large parts of the market where batteries aren’t close to competitive yet; where they won’t be in the next 5 years; where they might not be in the next 10 years.
    But what we know is this: Batteries (and other storage technologies) will keep dropping in cost. Market growth accelerates that. And thus helps energy storage reach the parts of the market it isn’t priced yet for.
    Who Benefits?

    Storage has plenty of benefits – higher reliability, lower costs, fewer outages, more resilience.
    But I wouldn’t have written these three thousand words without a deep interest in carbon-free energy. And the increasing economic viability of energy storage is profoundly to the benefit of both solar and wind.
    Let me be clear: A great deal can be done with solar and wind with minimal storage, by integrating over a wider region and intelligently balancing wind and solar against one another.
    Even so, cheap storage is a big help. It removes a long term concern. And in the short term, storage helps whichever energy source is cheapest overcome intermittence and achieve flexibility.
    Batteries are flexible. Storage added to add reliability the grid can soak up extra solar power for the hours just after sunset. It can soak up extra wind power from a breezy morning to use in the afternoon peak. Or it can dispatch saved up power to cover for an unexpected degree of cloudiness or a shortfall of wind.
    Once the storage is there – whatever else it was intended for – it will get used for renewables. Particularly as those renewables become the cheapest sources of electricity on the grid.
    Today, in many parts of the US, wind power is the cheapest source of new electricity, when the wind is blowing. The same is true in northern Europe. On the horizon, an increasing chorus of voices, even the normally pessimistic-on-renewables IEA, see solar as the cheapest source of electricity on the planet, heading towards 4 cents per kwh. Or, if you believe more optimistic voices, a horizon of solar at 2 cents per kwh.
    Cheap energy storage adds flexibility to our energy system overall. It can help nuclear power follow the curve of electrical demand (something I didn’t explore here). It helps the grid stay stable and available. It adds caching at the edge, reducing congestion and the need for new transmission.
    But for renewables, especially, cheap storage is a force multiplier.
    And that’s a disruption I’m excited to see.
    —-
    There’s more about the exponential pace of innovation in both storage and renewables in my book on innovating to beat climate change and resource scarcity and continue economic growth:The Infinite Resource: The Power of Ideas on a Finite Planet

  • #2
    Re: Is Tesla toast? A provocative work on energy storage

    Originally posted by Southernguy View Post
    I’ve been writing about exponential decline in the price of energy storage since I was researching The Infinite Resource.
    Once I read this line I couldn't read any more. He's focused on one technology. Energy storage and L-ion improvements are very different issues.

    Comment


    • #3
      Re: Is Tesla toast? A provocative work on energy storage

      Originally posted by santafe2 View Post
      Once I read this line I couldn't read any more. He's focused on one technology. Energy storage and L-ion improvements are very different issues.

      Very true, santafe2.

      Here is a good report by the National Renewable Energy Laboratory that compares the costs of various energy storage technologies.

      http://www.nrel.gov/docs/fy10osti/46719.pdf

      Here's the basic cost comparison chart from that report



      Pumped storage hydroelectric power is great and is far and away the most mature, but a good location is rare. One needs a tall mountain right near a hydroelectric dam so the upper reservoir is handy near the river or lower reservoir. The vast majority of gigawatt hours of grid storage in service today is pumped hydro.

      Compressed Air Energy Storage (CAES) is the cost winner and pretty well understood. Note that for electric power plants, CAES does not simply pump up air storage and then release it out through an air turbine. Instead, the compressed air is used in a gas combustion turbine to bypass the compressor section and avoid the mechanical shaft load of the compressor section. Again, one needs a good site with geologic air storage, but gas wells and salt mines are more common than good sites for pumped hydro.

      NREL seems to be advocating various hydrogen storage schemes and the report is written from that viewpoint.
      .
      .
      .
      Last edited by thriftyandboringinohio; 05-07-15, 12:36 PM.

      Comment


      • #4
        Re: Is Tesla toast? A provocative work on energy storage

        Top Ten Facts about Tesla’s $350/kWh (DC) PowerWall battery

        MAY 8, 2015

        Special post by Bruce Lin and Matthew Klippenstein

        There’s an MBA joke about scaring your clients by asking them “What’s your China strategy?”.

        Today, it’s “What’s your Tesla strategy?” $350/kWh (DC) retail really is that significant. In the few days since the Tesla energy storage announcement, we’ve had a half-dozen people ask what we think about it. As energy systems developers with experience in several different chemistries and system scales, we can make some well-grounded educated guesses on the design and economics.

        Here are our top ten conclusions, with plenty of links to reference information.

        1. The 92% efficiency figure is misleading
        The “92% efficiency” figure quoted by Tesla isn’t as good as it sounds, but it doesn’t matter.

        The PowerWall batteries themselves likely run at about 48VDC, and are boosted by an internal DC-DC converter up to 350V-450V. This is to match the DC input of typical inverters. The huge difference in voltages means a significant efficiency hit – one-way efficiencies are probably about 94% to 97%.

        You have to add a AC-DC inverter (with 97% efficiency each direction), so your real-world AC-AC round trip efficiency drops to 87%. This is lower, but it doesn’t matter, because losing 13% of your low cost electricity is insignificant in the economics. Amortizing the capital cost of your system, by ensuring long lifetime for the batteries, is far more important.


        2. The battery architecture is designed for long durations, which means low power.

        It’s likely that the battery packs are two modules identical to (or very similar to) the Tesla Model S design, in order to achieve production synergies. Each module has 6 groups, and 74 cells in parallel per group. This makes a total of almost 900 cells, with an operating voltage of about 48 VDC which makes certain safety aspects easier to design. The two packs are one-eighth of a Tesla Model S 85 kWh.

        92% efficiency can only be achieved by running the battery at extremely low current, to minimize resistance losses. (Our Catalytic battery model suggests this is as low as 0.6A per cell) For example, a normal Tesla car battery probably has a DC-DC round-trip efficiency of less than 80% because people charge quickly (one round of resistance losses), and output high power when driving (a second round of resistance losses).

        The tradeoff is that they are putting in many, many cells to supply the 10 kWh – far more than would be necessary for the rated 2 kW of power, or even the peak 3.3 kW. (In a car, those two modules would be pushed to deliver about 30 kW of power) In other words, the PowerWall was designed for energy output, not power output.

        By the way, this is the traditional argument of flow battery proponents – if you want to store lots of energy in regular batteries, you wind up being massively oversized for your desired power output; the faster you discharge electrons, the bigger your losses become, and the bigger energy your battery has to become, to deliver the same kWh to the outside world. In essence, you’re paying for a lot of power you can’t use. Alternately, if you did want to run high power, you would need more cells to supply the 5 hours of energy.


        This isn’t a show-stopper – the achievement of $350/kWh (DC) is still significant. Customers will just need to be aware that they will need multiple units to serve high power.

        3. Thermal regulation may be a hidden performance cost

        Another benefit of operating at such low current densities is that there will hardly be any waste heat during charge and discharge (as a result of the lower resistive losses). However, ambient temperatures will be the major thermal issue – cooling during hot days to ensure long lifetime, and heating to prevent the cells from freezing in the winter. We can guarantee the parasitic efficiency of the thermal regulation system is not included in the quoted 92% DC-DC efficiency – electric heating to keep the cells from freezing will be a big efficiency hit for outdoor-mounted units in cold climates. This shouldn’t be an issue for Australian early-adopters, but it will be interesting to see what users in Germany (Tesla’s other early target market) report.

        Along these lines, the flat design isn’t solely for aesthetics – it provides for more surface area for passive cooling, to keep the cells running cool and increasing their lifetime. Note that the raised “hump” in the design also discourages stacking of PowerWalls in front of each other.
        [Edit May 10 2015: after doing some more calculations, it seems unlikely that this is correct – the heat generation from cycling really is negligible, and it’s more important to keep the system insulated from ambient heat/cold and incident solar heating. So it’s more likely an insulated box than a radiator. Would be very interesting to see one opened up …]

        The fact the system runs on liquid cooling isn’t particularly significant. The Model S pack already uses liquid cooling, so why not use the same technology?

        4. Your batteries can last hundreds of cycles, if the system is designed right

        How come 7 kWh is only $500 cheaper than 10 kWh? Most likely, they have the same two modules, and the 7 kWh unit is merely cycled more shallowly (70% of the depth-of-discharge of the 10 kWh unit). The 10 kWh unit is only rated for weekly cycling, which means far fewer cycles over its lifetime (about 500 rather than roughly 3,500). By comparison, the 100,000 mile warranty on the batteries in the 60 and 85 kWh Model S implies up to 1,700 deep-ish discharges, or a (much) higher number of (much) shallower discharge cycles.

        It’s fine if the 7 kWh “daily cycle” system loses capacity over repeated cycles, since it effectively has 30% more margin than the 10 kWh unit. Also, the fact that each cycle is very mild inherently reduces the chance of the undesired, damaging side-reactions that gradually impair batteries’ capacity.
        Interestingly, the 10 kWh high-energy system uses lithium nickel-cobalt-aluminum cells (the same chemistry used in the Model S), while the 7 kWh daily-cycle system uses lithium nickel-manganese-cobalt “NMC” cells (actually a more common chemistry, used in the Nissan Leaf and power tools).


        Image credit: Theron Trowbridge, CC-BY-NC 2.0

        5. Cutting the grid connection will cost two or three times more than you think

        2 kW should cover the average 1.2 kW electricity usage of the average American house, but 3.3 kW peak power will not be enough if you have many devices in a large American house, all running at once, and you want to disconnect entirely from the grid.

        In fact, a SolarCity VP admitted that a single PowerWall is not enough to disconnect entirely from the grid, as 7 kWh doesn’t really offer enough power to cover all non-daylight hours: “it would require multiple units to take someone off the grid.”

        Elon Musk noted in the 2015Q1 earnings call that it does not make economic sense to go off-grid, with PowerWalls. It was claimed that it might be economically in Germany, where feed-in-tariffs are less expensive – if there’s enough demand from our readers, we’ll do an economic analysis of this case next.

        6. The all-in price is twice the $350/kWh ‘wow’ number, but still impressive

        The core cell cost that enables this $350/kWh cost is believable. Earlier this year Swedish researchers polled a number of battery electric vehicle manufacturers on their proprietary cost structures, and estimated that Nissan and Tesla are currently at $200-$300 per kWh for the battery pack. The PowerWall sale price is an excellent real-world confirmation that manufacturing prices really are in this range.

        However, the $3,000 or $3,500 cost is for the DC system only – be careful to compare apples to apples when looking at other products. For example, the inverter will add around $1,000 to $2,000 to the cost of the device.

        As another real-world point, SolarCity is quoting $7,140 to add the PowerWall to a solar installation (includes inverter, maintenance contract, installation, control system). This doesn’t sound unreasonable, and again $700/kWh for a small home-scale system is very cheap, though as mentioned above, multiple PowerWalls may be needed for many customers. SolarCity is doing well with this sort of deal – the price is for new solar installations only, where SolarCity would have to install an inverter, control system, and wiring anyway, so it’s cheap for them to kill two birds with one stone.

        Musk was being slightly misleading in his 2015Q1 earnings call when he said the inverter is part of a solar installation and should not be counted in the cost. Either SolarCity’s $7,000 includes the inverter cost, or the inverter cost is assigned to the solar part of the install, and other factors are raising the cost to $7,000. Either way the true price is more like $700/kWh (AC installed)

        7. The PowerWall does not let you make money on arbitrage, and Tesla knows it.

        Tesla executives confirmed that the economics don’t work in America, and here’s why. As a residential owner, in the best case you’ll make 40 cents/kWh selling to the grid at peak hours, and buy at 10 cents/kWh at night. (Northern California utility PG&E’s Time Of Use residential rate sheet).

        Once you include round-trip efficiency losses, that’s about $1.66 gross profit per 7 kWh (DC) cycle.

        Note that PG&E gives you that 40 cents/kWh only during the summer (defined as May-October). For the other half of the year, the difference is negligible and uneconomic.

        So revenue is $1.66 x 183 days x 10 years = $3,000. You’ll just about recoup the cost of the product, but you won’t profit because of two factors – the cost of inverter and installation, and the time value of money. We’re in a low-interest environment, but setting aside $7,000 today to make back $3,000 over 10 years still leaves you down $4,000 – not a very good deal.

        Your utility will be happy that you help them smooth out peaks and troughs this way, but they won’t make it worth your while. In the longer run, enlightened utilities may offer you demand pricing if you promise to keep maximum power low, or pay you to absorb spikes in power. And it’s likely that SolarCity (or the other installers) will take a cut for interfacing with the utility on your behalf, to participate in these kinds of demand-side management activities. It’s still hard to see this win on raw economics for a typical homeowner.

        8. The PowerWall is for three different groups – and maybe a fourth

        The economics don’t make sense for most customers in North America, but some will find it worthwhile:
        • Customers who highly value staying powered during blackouts, and specifically want a battery. A generator would be cheaper, but the battery will be quieter, quicker to start, and avoid fuel storage.– Customers who want to get off the grid entirely, in low-power applications at remote locations where a grid hookup (or upgrade) is prohibitively expensive, or with very expensive power
        • – Early adopters who enjoy being able to show off the sleekly-designed PowerWall to their friends. It worked for the Tesla Roadster.


        We’ll do a more detailed analysis of levelized cost of electricity (LCOE) and the German use case in a later article.

        What this means is that, by itself, the Tesla PowerWall residential unit won’t disrupt the energy industry, as it’s looking like a niche product. The 40,000 early adopters that have reserved a PowerWall add up to 0.4 GW (a fraction of a single fossil power plant, or a very large solar installation, or 4,500 Model S cars). It’s yet not clear that it will expand much beyond that.

        Still, it’s cheap, and it’s available (soon). These are huge factors in the energy business, and could lead to further scale.

        9. The strategic impact is mainly on competitors, and Tesla’s supply side

        The $350/kWh (DC) number is impressive, and Tesla did a good job of shocking industry watchers by quoting the DC-only, no-installation cost. Even the full price of $700/kWh (AC) is very cheap for a small-scale residential product, and research labs and energy storage competitors are going to have to explain their own path to beating that number.

        We don’t have much information about the large-scale utility systems yet. We would expect them to be cheaper than $700/kWh all-in, and this already may be enough to gain significant traction. The highly modular approach with small building blocks (100 kW) is interesting – this could be a Google server type approach where a system is built of many cheap, replaceable parts. If there’s enough interest we’ll write more on this later.

        Commercial customers can benefit from avoiding demand charges – if they commit to never exceeding a certain maximum power, this can gain them significant savings from their utility suppliers. This will be particularly true for commercial customers with large solar arrays in jurisdictions where feed-in tariffs are lower than utility rates – if they produce surplus electricity, it could be far more lucrative for them to charge their batteries, to minimize their grid draw when utility rates are highest.

        On the Tesla side, there may be a supply chain play here. Every time Tesla doesn’t meet purchase agreements or sells fewer cars than projected, it can use these PowerWalls to soak up supply. Used battery packs may be a future part of the equation as well. Used packs are difficult to maintain and recycle, since they represent a safety risk, so rebuilding them into 7 kWh PowerWalls (running at extremely low current to extend their life) may allow Tesla to hit ever lower price points going forward.

        Conclusion

        There are a lot of details that Tesla would like to paper over in their $350/kWh (DC) announcement – so we hope that you find this analysis useful and perhaps a bit more in-depth than the first wave of articles published elsewhere. Still, Tesla’s PowerWall release is a ground-breaking announcement and a challenge to the rest of the industry, and we look forward to what comes next. Let us know what you think in the comments below

        Catalytic Engineering is well-positioned for these sorts of assessments and we’re available for more detailed analysis, competitive intelligence reporting, engineering due diligence projects, etc. in batteries and other system engineering projects – please get in touch.

        P.S. For our attentive readers who were keeping track, here’s number 10: The presentation started almost an hour late, and the electrical power for the event was run entirely on the batteries. Not to say that they’re linked, but a good reminder that it’s still early days for this technology and product, especially as Tesla has job postings for dozens of engineers to work on the second (non-prototype) generation of the PowerWall.

        http://www.catalyticengineering.com/...rwall-battery/

        Comment


        • #5
          Re: Is Tesla toast? A provocative work on energy storage

          One comment:

          The Powerwall is for Hawaii. Solarcity is poking a stick in the eye of HECO. It may be for elsewhere, but wow, is it ever for Hawaii.

          Comment


          • #6
            Re: Is Tesla toast? A provocative work on energy storage

            Thanks Don, that's an excellent article.

            I have seen papers about plug-in EV's that talk about the possibility of using the car batteries this way when the car is plugged in to the home charger. If one imagines thousands of cars plugged in and available on a city grid it could be a significant amount of energy storage available for the morning surge of electricity demand.

            The authors did a great job with the efficiency discussions. They left out one factor that makes a battery pack look a little bit better. That factor is transmission losses on the transmission and distribution wires. Overall, we lose about 4% of our conventional electricity to line losses in the grid wires. In a remote area it's more, close to the power plant it's less.

            Comment


            • #7
              Re: Is Tesla toast? A provocative work on energy storage

              Originally posted by thriftyandboringinohio View Post
              Thanks Don, that's an excellent article.

              I have seen papers about plug-in EV's that talk about the possibility of using the car batteries this way when the car is plugged in to the home charger. If one imagines thousands of cars plugged in and available on a city grid it could be a significant amount of energy storage available for the morning surge of electricity demand.

              The authors did a great job with the efficiency discussions. They left out one factor that makes a battery pack look a little bit better. That factor is transmission losses on the transmission and distribution wires. Overall, we lose about 4% of our conventional electricity to line losses in the grid wires. In a remote area it's more, close to the power plant it's less.
              Are line losses mitigated by high voltage?

              Comment


              • #8
                Re: Is Tesla toast? A provocative work on energy storage

                Yes high voltage helps.
                That's why the transmission lines run at 20,000 volts or more.

                Comment


                • #9
                  Re: Is Tesla toast? A provocative work on energy storage

                  Originally posted by thriftyandboringinohio View Post
                  Yes high voltage helps.
                  That's why the transmission lines run at 20,000 volts or more.
                  never mind the 138kv ones... (but still, they DO drop da watts, esp when sending coal power to socal... ;)

                  Originally posted by don View Post
                  One comment:

                  The Powerwall is for Hawaii. Solarcity is poking a stick in the eye of HECO. It may be for elsewhere, but wow, is it ever for Hawaii.
                  chrikie mate - why cant ya just admit it that ya miss me witty commentary...

                  Comment


                  • #10
                    Re: Is Tesla toast? A provocative work on energy storage

                    Overall this is a good article but I'd like to point out a few issues.

                    Originally posted by don View Post
                    1. The 92% efficiency figure is misleading

                    The Tesla product is an on-grid battery back-up system. It's more elegant and most likely a bit more efficient than a standard lead acid based BBU but the only thing different from the systems we and everyone else sold 10 years ago are type of batteries. The nice improvement is that those systems can not cycle as many times as Lithium batteries. The best of those systems are rated by California at 92% efficiency. It's very unlikely that the Tesla system will be rated lower than this when it's listed. Part of the Go Solar site was down tonight or I could pass on more information.

                    Originally posted by don View Post
                    2. The battery architecture is designed for long durations, which means low power.

                    Like all on-grid battery back-up systems, this one is only useful as an emergency backup - Your refrigerator and a some LED lights -
                    Not your air conditioning and certainly not your house!


                    Originally posted by don View Post
                    5. Cutting the grid connection will cost two or three times more than you think

                    No, it will cost 10-15X. Only multi-millionaires take their 3,000+ sq. ft. homes off grid. Don't even think about it if you don't have $100k to throw at this pet project. Not to mention that when you go off grid, Tesla, your utility and your various government agencies won't subsidize you like they will if you stay on the grid and back-feed production during peak hours.

                    Originally posted by don View Post
                    7. The PowerWall does not let you make money on arbitrage, and Tesla knows it.

                    Here's where the boys get very confused. Your battery system, Tesla or otherwise, does not produce energy and does not directly back-feed to the grid, that's what your solar panels do AND they do that whether you have a battery back-up system or not. In fact, having a battery back-up like Tesla's will ensure that you produce less energy to back feed because your system will first have to keep the batteries charged. The ONLY thing a battery back-up will allow you to do is produce slightly less energy than you would have produced anyway so that you can time shift your solar panel production. If that has value, knock yourself out and get a battery back-up.

                    Now say it will me one time - This is an emergency battery back-up system. Nothing more, nothing less. It's a battery, it stores energy, it does not produce energy. This one is reasonably priced and looks elegant enough that your wife might let you buy it, but it's art and has very little utilitarian value.

                    Comment


                    • #11
                      Re: Is Tesla toast? A provocative work on energy storage

                      Originally posted by santafe2 View Post
                      ....
                      Now say it will me one time - This is an emergency battery back-up system. Nothing more, nothing less. It's a battery, it stores energy, it does not produce energy. This one is reasonably priced and looks elegant enough that your wife might let you buy it, but it's art and has very little utilitarian value.
                      guess the real question becomes (assuming that having a PV+batt+genset backup system is THE goal, which seems to me OUGHT to be the goal - since i couldnt imagine how one could feel dumber - during a NIGHT TIME grid outage - than sitting in the dark with 20grand worth of PV on ones roof and NO batts?)

                      how do the numbers work out for tsla's batt pack vs something like say lifeline AGM's (who's 8D = 3kwh @ 100% drawdown) ?
                      and would also have to assume that tsla's capacity calculation (watts x hours) is based upon 100% drawdown?
                      (which kills cycle life)

                      Comment


                      • #12
                        Re: Is Tesla toast? A provocative work on energy storage

                        Originally posted by santafe2 View Post
                        Overall this is a good article but I'd like to point out a few issues.


                        The Tesla product is an on-grid battery back-up system...Like all on-grid battery back-up systems, this one is only useful as an emergency backup - Your refrigerator and a some LED lights - Not your air conditioning and certainly not your house! ...

                        Thanks for those insights, santafe2.
                        I am confident everything you present is completely true, you are an expert in this industry.
                        Still, I offer this counterpoint.

                        You are looking at this equipment logically and from the point of view of the homeowners; the people who will pay for these things and live with them.

                        Mr. Musk is always a promoter who is looking for some angle, and one of his favorite angles is government subsidies. His SpaceX company is trying to break into govt funded rocket launches, and Tesla raked in a big pile of government incentives for electric cars.

                        With this PowerWall home battery system, I suspect he will promote it behind closed doors from the viewpoint of power utilities and grid operators, along with air quality regulators.

                        If an area has thousands of these units in peoples homes, all able to remove load from the grid during demand peaks, well that is pretty attractive to the power companies. They can keep their base load steam turbines running steady, and avoid starting up the natgas peaking units. Even better that this huge storage capacity gets purchased and maintained by thousands of individual homeowners while the power company gets to use it free of charge. Elon can get those guys on board -Duke, AEP, Entergy, Constellation, Alliant, First Energy...don't forget Warren Buffet, with Berkshire Hathaway Energy.

                        The peaks get shaved; the power utilities get maximum profits; the air regulators get the reduction in the peaking units exhaust emissions; and everyone is happy. Everyone except the poor rubes who bought these things expecting some payback. They get screwed.

                        The whole scheme is pretty ripe for Musk to harvest. The dream team of Tesla with the big electric power corps and the air regulators all together can probably convince the government to pony up some purchase tax credits to save the planet. It worked for the electric cars.

                        Musk will be sure the utilities show the homeowners some little line item credit on the monthly bill because they own one of these. A fifteen dollar a month discount or some such. The whole thing is just complicated enough that aunt Mildred will not probably ever realize she's been duped twice. Once when she bought her unit, and once when she gave herself a tax credit to help buy it.

                        It does not matter at all that you or I can prove the numbers will never pay off for the homeowner. Stranded costs are like taxes - they are for the little people.

                        Snake oil, sold expertly, always works out that way.

                        Comment


                        • #13
                          Re: Is Tesla toast? A provocative work on energy storage

                          Mr. Musk is always a promoter who is looking for some angle, and one of his favorite angles is government subsidies.
                          +1 residing inside the golden circle of private profit at public expense

                          The whole scheme is pretty ripe for Musk to harvest.
                          Not sure on that one. With so little usable power available, going offline is a candle and flashlight affair, not a/c, freezer and range friendly. The sheeple won't buy it if they know that.

                          Comment


                          • #14
                            Re: Is Tesla toast? A provocative work on energy storage

                            Originally posted by thriftyandboringinohio View Post
                            With this PowerWall home battery system, I suspect he will promote it behind closed doors from the viewpoint of power utilities and grid operators, along with air quality regulators.

                            If an area has thousands of these units in peoples homes, all able to remove load from the grid during demand peaks, well that is pretty attractive to the power companies. They can keep their base load steam turbines running steady, and avoid starting up the natgas peaking units. Even better that this huge storage capacity gets purchased and maintained by thousands of individual homeowners while the power company gets to use it free of charge.
                            I haven't looked at how these systems function programmatically TBO but I suspect this is a fair description of their functionality. Since I've moved on to another area of business I don't have direct access to Tesla's contracts. I'll have to ask one of my friends to send me one so I can understand the home owner's contractual obligation to the utility.

                            I've been thinking about how this system might function from a utility's point of view. That is, what's different about the Tesla system that will allow it to offer the utility instantaneous back-feed at a meaningful level. To do that it will have to be a dual functioning system.
                            • In case one, utility power has gone down and the home is operated through a traditional emergency sub-panel. There's nothing new here and as Lek pointed out, your expensive solar electric system just offered you functionality you didn't have before. As the article pointed out, you should plan to draw no more than about 10% of the system per hour or 700 watts...that's not much.
                            • In case two, your utility is managing peak load and your Tesla battery back-up is now a mini-substation. The system's power inverter is programmatically set to take a command from the utility to have your home draw the first 2kW, (just a guess for now), from the battery system before drawing energy from the utility. If there are 500,000 of these systems installed, that's a potential gigawatt off-set. This is great news for the utility as your system could potentially provide 3+ hours of sub-station functionality during the day. At some point it's a wash as your solar array will have to recharge your batteries. Remember the energy is not coming from the battery system it's coming from your solar panels.


                            From the utility's point of view, batteries are better than solar panels as they can provide a known amount of available energy. Solar panels are less sure as they provide variable power based on weather. Also, a battery back-up system sold as an add-on to existing solar systems provides incrementally more energy at a substantially smaller investment per available kWh. Smaller investment = more participants.

                            Put the Tesla logo on it and everyone is watching the wrong hand as you pull the ace from your sleeve.

                            Comment


                            • #15
                              Re: Is Tesla toast? A provocative work on energy storage

                              Originally posted by don View Post

                              ...Not sure on that one. With so little usable power available, going offline is a candle and flashlight affair, not a/c, freezer and range friendly. The sheeple won't buy it if they know that.
                              I think that selling challenge can be managed by Musk et al.
                              If he keeps his hard claims near the truth, and uses puffery and showmanship to sell the sizzle, it can work.
                              It won't only be advertized by Musk. We will get inserts in our monthly power bills offering one. The evening news will have a few segments talking about them. The banks will run promotions for the loans to buy them.

                              Joe sixpack likes the idea of minimum backup power for his aquarium and refrigerator; that's what drives the big market in home standby generators that Generac and Kohler sell at Home Depot and Lowes.

                              Jeep sells him a Cherokee with images of people off-roading in the rugged back country mountains of Utah. Joe knows he'll never do that, but likes to think of himself as the kind of guy who might. Everything Joe buys is sold that way -his tires show supermodels touching them, his take-home fried chicken shows an idyllic family dinner. I just bought a Hyundai Sonata and it has paddle shifters. I guess that's so when my cheap, under-powered family sedan is screaming down the back stretch at top speed and I enter the chicane, I can keep both hands on the wheel as I steer for the apex.

                              We have all been trained to automatically expect less to be delivered than was promised, and just accept that our paddle shifters, off-road suspensions, and commercial quality stoves are a waste of our money. But we find them cool.

                              If Joe six pack gets through a 36 hour blackout with a bit of power, and sees that $15 credit on his bill every month, that's par for the course and he'll be pretty happy. Especially when, during the blackout, he gets to gloat to the engineer next door who told Joe it was a waste of money.

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