Tesla’s battery revolution: is this the ‘tipping point’ for solar energy?

Tesla’s ‘Powerwall’ battery system aims to bring down the cost of energy storage. Matthew Partridge asks if this is the ‘tipping point’ for solar energy.


Tesla's Elon Musk claims the powerwall will dramatically cut the costs of energy storage

Tesla's Powerwall' battery system aims to bring down the cost of energy storage, enabling more homes to leave the grid. Is this the tipping point' for solar energy?

What's happened?

Elon Musk, founder and CEO of electric-car maker Tesla, has announced that the company will be selling large lithium batteries that enable homeowners and small businesses to store the energy generated by solar panels. This will allow them to draw on this power during the night, or at other times when the solar panels aren't generating enough energy on their own, to power electrical appliances.

At the moment, high storage costs mean that a lot of solar power is wasted, and users still have to rely on conventional sources of energy. The hope is that Musk's system will reduce waste, and even allow users to bypass the grid entirely.

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While there are already battery systems available, they tend to be extremely expensive and are based around older lead-acid technology. Musk claims that the lithium-based system, which is priced at $3,500 for a 10kwh battery (and $3,000 for a 7kwh model) will cut costs dramatically.

Is this really going to save people money?

Experts agree that this product won't be enough to make solar power economic for most households and small businesses. The problem is that lithium batteries will only operate for a limited number of cycles (a small amount of capacity is lost every time the battery is charged and discharged).

Forbes' Christopher Helman estimates that this means that storage costs alone will amount to $0.15 per kwh, above the cost of electricity in many US markets. Throw in another $0.15 for solar generation (the amount charged by SolarCity for use of their solar panels) and it becomes "just another toy for rich, green people".

Bloomberg's Tom Randall also agrees that the quoted prices are "not yet cheap enough to make economic sense for most grid-connected customers".

Are there any other problems?

Two other big issues are the costs of installing and equipping the system (neither of which are included in the package) and the lack of power The Guardian's Karl Mathiesen notes that installation costs, especially in the UK, could end up doubling the upfront costs for some users. In the US, SolarCity is offering a full installation with additional equipment for $7,140.

The system also limits the amount of power that can be used at any one time to 2Kw. This is done to prevent the system from completely discharging (which damages the battery). However, The Register's Richard Chirgwin likens this to limiting the speed of a car to 40 km/h. He points out that this amount of energy isn't enough to "boil water for coffee in your 1,500 watt electric kettle at the same time as making toast in your 950 watt toaster". Indeed, he says, "it's not hard to imagine" an off-grid user "needing three Powerwalls to cover the peaks".

So, why should we be interested?

The Powerwall may still not be cheap enough to make off-grid solar power economical for residential users and small businesses. However, the Guardian's Karl Mathiesen thinks that it shows how "battery prices have been steadily dropping". Chirgwin hopes that this will "spark a price response from the incumbents", encouraging them to cut the cost of their storage systems.

Tom Szatsow of the Climate Spectator agrees, asking that "if this is what Tesla energy has on the market in 2015, do we dare imagine what is possible in 2020?" Tesla is already building a gigafactory' that aims to produce batteries on a mass scale, pushing down costs.

What about large scale users?

While systems aimed at households may be years away from being cost-effective, Christopher Helman thinks that the future lies in generating storage technology that can be used by large utilities. After all, "any truly viable energy source is more economic when deployed on a large scale than on a small scale".

Helman notes that at the same time as Musk announced the Powerwall, he also launched the much larger Powerpack, aimed at large businesses and utilities. Indeed, Bryan Bishop of The Verge notes that "states like California with aggressive renewable energy mandates are demanding utilities add storage capacity".

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri