Thursday, May 7, 2015

Tesla's Powerwall: Upping the Ante for Energy Storage

By Nick Lawton, Staff Attorney

Breaking out of a strict focus on electric vehicles, Elon Musk’s company Tesla Motors recently announced production of a new line of batteries designed to store and deliver energy for buildings. In a debut video for the new “Powerwall,” Musk characterized the technology as “a fundamental transformation of how the world works.” That’s a big claim, but Musk is no stranger to big ambitions.

One of Musk’s ambitious goals is to have the world transition to 100% renewable energy. To that end, he has already developed commercially viable ways to develop two of the most quickly growing markets in the United States: solar energy and electric cars. He is a chairman of SolarCity, one of the nation’s leading solar developers, and the CEO of Tesla Motors, one of the nation’s leading manufacturers of electric vehicles. (Another lofty goal is to make humanity into a spacefaring civilization, to which end he has founded the civilian spaceflight venture SpaceX.)

Now, with the announcement of the Powerwall, Elon Musk is moving into a third market with tremendous potential for growth: energy storage. Many energy analysts agree that storage is going to be a very important and lucrative market in the next decade, with the potential to upend existing utility business models. Considering Musk’s impressive success with Tesla Motors and SolarCity, when he says the new Powerwall is “a fundamental transformation,” the claim deserves some attention.
Tesla's Powerwall 

Mixed Reception in the Media

Some media coverage of the Powerwall’s announcement has been largely celebratory. For example, a piece at Vice describes the Powerwall as potentially being “among the most significant, recent technological innovations.” Another piece at quotes a professor of energy policy at Exeter University as describing the Powerwall as a “nail in the coffin” for the standard utility business model. The basic argument for this idea is that as solar power and energy storage become increasingly affordable, more utility customers will meet their needs with their own power, diminishing the sales that utilities rely on—and potentially changing the world, or at least U.S. energy markets, as Musk aims to do.

Other commentators are more skeptical about the Powerwall. The Motley Fool notes that although the potential demand for this technology is large, “the market for energy storage is new and mostly unproven.” The Register takes issue with the Powerwall’s limited capacity to actually deliver power. Although each Powerwall unit can store between 7 and 10 kilowatt-hours of energy, it puts out stored energy only at a rate of two kilowatts. This means that at full blast, each Powerwall will run for between 3.5 and 5 hours, but it also means that each unit could not run multiple large appliances at once. For example, a 1.2 kW air conditioner and a 1.5kW electric kettle running together would overtax the Powerwall. The low rate of power delivery may prolong the battery’s useful life, but it also diminishes its ability to fully power a home. Meanwhile, Tristan Edis at takes issue with the price. He calculates that the Powerwall would require an 11-year payback period, which is one year longer than the product’s warranty. Similarly, NPR’s coverage quotes some skeptics who argue that the price for the Powerwall is simply too high for many customers.

Upping the Ante: The Powerwall is the Beginning of Something Big

Both the celebrants and the critics of the Powerwall raise legitimate points, but the Powerwall seems likely to live up to its hype. Musk describes the demand for the Powerwall so far as being “crazy off the hook,” noting that customers have already ordered all the units that Tesla can produce through 2016. Still, given the possibility of a long payback period, the existing demand for the Powerwall may be strongest among those with more environmental than economic motives.

In my view, though, the best aspect of the Powerwall is the fact that it is a first draft open to improvement. As with Tesla’s electric car technology, Musk has said that he will not pursue patent protection for the Powerwall, instead allowing the whole world access to the technology and the freedom to improve it. As the industry in general scales up, and as Tesla in particular scales up production at its new Gigafactory in Nevada, improvements to the product and reductions in cost are almost certain. Ten years ago, solar panels cost far more and produced far less energy than they do now. Ten years ago, lithium-ion batteries (the Powerwall’s basic technology) cost three times as much and stored roughly half as much energy. Ten years from now, these technologies will likely beat the price of fossil fuels. Tesla’s first draft may not change the world all by itself, but it is a great boost for a commercial energy storage movement.

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