ECONOMICS OF TESLA POWERPACK AND POWERWALL SYSTEMS

The rewrite of this article was prompted by an EIA report titled:

Utility-Scale Battery Storage Costs Decreased Nearly 70% Between 2015 and 2018.

 

The graph shows average values and ranges.

The graph shows the minimum cost trending towards $500/kWh, and the maximum cost trending towards $1000/kWh, within about 5 years. See notes.

The values are for custom-engineered, site-specific, utility-scale battery systems, i.e., greater than 2 MWh,

 

The average turnkey cost of utility-scale battery storage in the US has decreased from $2,152/kWh in 2015 to $625/kWh in 2018. At the end of 2018, the US had 869 MW/1236 MWh of battery capacity

https://www.eia.gov/todayinenergy/detail.php?id=45596

 

Battery Storage Costs Vary by Region and Application: Independent system operators (ISOs) and regional transmission organizations (RTOs) manage the operation of the U.S. electric system.

 

To understand how battery storage costs vary based on a battery unit's location, the EIA grouped cost data into regions based on RTOs/ISOs or (such as in the case of California) aggregated different entities in the state to avoid disclosing respondents’ confidential information in areas with fewer battery systems.

 

At the regional level, the 2013 to 2018 average utility-scale battery costs ranged from $1,946/kWh in the PJM Interconnection (PJM), which manages the electric power grid in 13 eastern and midwestern states and the District of Columbia, to as low as $947/kWh in Hawaii.

 

NOTE: The New England turnkey capital cost of custom-engineered, site-specific, utility-scale (more than 2 MWh), battery systems is about $1000/kWh, delivered as AC.

 

NOTE: Various financial services entities, such as Bloomberg and Lazard, project lower values than the EIA, likely to hype their business interests. It would be best to ignore those values.

TURNKEY CAPITAL COSTS OF BATTERY SYSTEMS

 

Tesla: Here are some low-cost battery systems from Tesla.

The examples show the Tesla hardware cost, so-called “pack” price.

Those prices are significantly less than the turnkey capital cost.

 

Most people are confused about the wide variation of “per pack” prices reported on by naïve pundits on various websites. Here are some clarifications:

 

Tesla has two categories of battery packs that are not comparable

 

1) Powerpacks, capacity 100 and 200 kWh. They are not mass-produced, but are part of site-specific, custom-designed installations (usually for utilities). They have higher “per pack” costs, $/kWh

 

2) Powerpacks for Tesla EVs, capacity up to 100 kWh, that are mass produced for assembly in Tesla EVs, and have lower “per pack” costs, $/kWh. As Tesla increases its production, the “per pack” price likely will decrease. See URL

https://insideevs.com/monthly-plug-in-sales-scorecard/

 

Example 1, Existing Small System

 

The Powerpack v1.5, capacity of 100 kWh, has a Tesla bi-directional inverter with a capacity of 50 kW, turnkey capital cost $72,000 (FOB price $47,000, plus $25,000 for shipping from US to France, tariffs/taxes, installation, test operation, etc.), or $720/kWh, delivered as AC.

 

https://en.wikipedia.org/wiki/Tesla_Powerwall

https://electrek.co/2018/01/10/tesla-powerpack-system-france/

 

Example 2, Existing Very Large System

 

The Tesla Powerpack 2 system in Australia, the largest in the world at that time, has a rated capacity of 100 MW/129 MWh, delivered as AC. The battery system feeds electricity to the grid or absorbs electricity from the grid to:

 

- Counteract the variable output of the nearby 315 MW French-owned wind turbine system to minimize it “upsetting” the high voltage grid. Synchronous-condenser systems perform a similar function.

- Prevent load-shedding blackouts and

- Provide stability to the grid, during times other generators are started, in the event of sudden drops in wind or other network issues.

 

The turnkey capital cost was about $66 million, or 66 million/129,000 = $512/kWh, delivered as AC, in 2016.

This is a low price, because Tesla was eager to obtain the contract. Here is an aerial photo of the system on a 10-acre site.

 

https://www.mercurynews.com/2017/12/26/teslas-enormous-battery-in-a...

https://en.wikipedia.org/wiki/Hornsdale_Wind_Farm

 

Example 3, Very Large System, 2018 Prices

 

The “pack” price of Tesla Powerpack 1 and 2 units, for large installations, was about $250/kWh in 2018.

The “pack” price does not include the inverter and supporting hardware, shipping, taxes/tariffs, installation, test operation, etc.

The “pack” price is applicable to installations greater than 100 MWh, equivalent to about 500 Powerpacks + 50 inverters.

The turnkey capital cost would be at least 1.6 x 250 = $400/kWh, delivered as AC, in 2018, depending on site location and conditions.

ANALYSIS OF A UTILITY-SCALE BATTERY SYSTEM

 

Assume $625/kWh, delivered as AC, is the 2018-turnkey capital cost of a utility-scale battery storage system. See note

If $625/kWh, annual payments would be $53.62/y, or 14.7 c/kWh per daily cycle, if amortized at 3.5%/y over the 15-year life of the system.

This is only the financial cost of the battery system.

There are many other costs, such as for annual operations and maintenance, service contracts, etc.

https://www.myamortizationchart.com

 

NOTE: The NE turnkey capital cost likely would be near $1000/kWh, delivered as AC., i.e., the financial cost would be 1000/625 x 14.7 = 23.5 c/kWh

 

1) If DC solar electricity were charged into the battery system, at about 20 c/kWh, equivalent to the cost at which Vermont net-metered solar is charged to the utility rate base (see table 3 in URL), there would be a system loss of about 15%.

https://www.windtaskforce.org/profiles/blogs/world-total-energy-con...

 

As a result, the electricity price would become 20/0.85 = 23.5 c/kWh, delivered as AC, plus at least 14.7 c/kWh financial cost, for a total of 38.2 c/kWh, charged to the utility rate base.

 

NOTE: The system loss is measured from solar system DC discharge, through the battery, to fed to distribution the grid as AC.

 

2) If AC from the grid were charged into the battery system, at about 5 c/kWh, the NE annual average wholesale price, starting in 2009, there would be a system loss of about 20%. See note.

 

As a result, the price would become 5/0.8 = 6.25 c/kWh, delivered as AC, plus at least 14.7 c/kWh for amortizing the battery system, a total of 20.95 c/kWh, charged to the utility rate base.

 

NOTE: The above “charged-to- the-utility-rate-base” prices should be compared to this alternative.

At present, NE utilities are buying electricity from owners of existing low-cost, near-zero-CO2 nuclear plants, and low-cost, low-CO2, very-clean-burning (compared to coal and wood) natural gas plants, for about 5 c/kWh, equivalent to the NE annual average wholesale price, starting in 2009.

 

NOTE: The system loss is measured from grid AC voltage, through the battery, to the grid as AC.

See table 10 in Appendix.

 

ANALYSIS OF THREE ALTERNATIVES

The alternatives are based on the turnkey capital cost, without subsidies and with subsidies.

The net effect of the various subsidies is to reduce the turnkey capital cost, and the energy cost/kWh, by about 50%

 

The usual subsidies consist of:

 

Upfront federal and state cash grants,

Generous federal and state tax credits

Generous feed-in tariffs to attract out of state investors

Accelerated depreciation in 5 years

Deduction of loan interest from taxable revenues

Local property and school tax abatements

Grid extension and tie-in to the high voltage grid, all or partially paid for by others

 

Alternative 1: The capital cost is amortized at 3.5%/y over 15 years. The turnkey capital cost is assumed at $625/kWh for a 100-kWh system. (The above Example 1 shows $720/kWh for a recent 100 kWh system).

 

Alternative 2: The capital cost is amortized at 9%/y over 15 years. The turnkey capital cost is assumed at a $625/kWh for a 100-kWh system. (The above Example 1 shows $720/kWh for a recent 100 kWh system).

 

It is assumed:

- Nighttime wholesale rate of 0.04 c/kWh (10 pm to 6 am)

- Peak-time wholesale rate of 0.08 c/kWh (5 pm to 8 pm)

- Battery system degradation is 10% over 15 years

- Battery system life is 15 years

- Round-trip, AC-to-AC efficiency is 20%. See table 10 in appendix.

- A turnkey capital cost of $625/kWh, delivered as AC

- Subsidies equivalent to reducing the turnkey capital cost by about 50%

 

Table 1

No Subsidies

No Subsidies

With Subsidies

With Subsidies

Alt. No. 1

Alt. No. 2

Alt. No. 1

Alt. No. 2

3.5%/y

9%/y

3.5%/y

9%/y

Battery capacity, as AC

kWh

100

100

100

100

Turnkey capital cost

$/kWh

625

625

312.5

312.5

Turnkey capital cost

$

62500

62500

31250

31250

Amortizing cost

$/y

5362

7607

2681

3804

Amortizing cost

$/15y

80430

114105

40215

57053

.

Electricity entering the battery, as AC

kWh/d

125.0

125.0

125.0

125.0

Round-trip, AC to AC efficiency

0.80

0.80

0.80

0.80

Electricity leaving the battery, as AC

kWh/d

100.0

100.0

100.0

100.0

Charge/discharge frequency

Cycles/y

365

365

365

365

Electricity loss, AC to AC

kWh/15y

136875

136875

136875

136875

Night-time electric rate

$/kWh

0.04

0.04

0.04

0.04

Peak time electric rate

$/kWh

0.08

0.08

0.08

0.08

Charging gain

$/15y

16425

16425

16425

16425

Net loss

$/15y

-64005

-97680

-23790

-40628

.

Throughput/y, year 1

kWh/y

36500

36500

36500

36500

Degradation

15y

0.10

0.10

0.10

0.10

Throughput/y, year 15

kWh/y

32850

32850

32850

32850

Average throughput/y

kWh/y

34675

34675

34675

34675

Life

y

15

15

15

15

Lifetime throughput

kWh/15y

520125

520125

520125

520125

Charging cost

c/kWh

0.123

0.188

0.046

0.078

Alternative 3: Wall-Mounted Powerwall 2.0 Unit by Tesla 

 

This alternative assumes the utility is:

 

Charging from the grid during late-night hours at 4 c/kWh

Discharging to the grid during peak demand hours at 8 c/kWh.

 

Here are some operating parameters of the Powerwall 2.0.

 

Table 2/Powerwall 2.0

 

Usable electricity

 13.5 kWh

Round trip efficiency, AC to AC

 10%

Continuous supply

  5 kW for 2.5 h

Continuous supply

1 kW for 13.5 h

Peak supply

 7 kW

 

Tesla estimates the installation of a Powerwall 2.0 would add $800 to $2,000 to the Tesla $7800 hardware bill.

However, this estimate doesn't include the cost of house wiring upgrades, taxes, permit fees, and connection charges.

https://www.tesla.com/sites/default/files/pdfs/powerwall/Powerwall%...

 

Here is an estimate of the turnkey capital cost of a Powerwall 2.0 unit

 

Table 3/ Powerwall 2.0

$

Tesla Powerwall 2.0, FOB factory

 6700

Supporting hardware

 1100

Tesla hardware bill

7800

Shipping, installation, etc.

 2000

Likely turnkey capital cost

   9800

 

Here is the cost of electricity storage of the Powerwall 2.0.

 

- Amortizing is at 3.5%/y for 10 years; Tesla takes back the unit at end of year 10

- Alt 1: No subsidies

- Alt 2: With 50% subsidies.

- The battery unit is discharged during peak hours and charged during night-time hours, each day.

Table 4

No subsidies

With Subsidies

Powerwall 2.0

Powerwall 2.0

3.5%/y

3.5%/y

Battery capacity, delivered as AC

kWh

13.5

13.5

Turnkey capital cost

$/kWh

726

363

Turnkey capital cost

$

9800

4900

Amortizing cost

$/y

1163

581

Amortizing cost

$/10y

11629

5815

.

Electricity entering the battery, as AC

kWh/d

14.85

14.85

Round-trip, AC to AC efficiency

0.90

0.90

Electricity leaving the battery, as AC

kWh/d

13.50

13.50

Charge/discharge frequency

Cycles/y

365

365

Electricity loss, AC to AC

kWh/10y

4928

4928

Night-time electric rate

$/kWh

0.04

0.04

Peak time electric rate

$/kWh

0.08

0.08

Charging gain

$/10y

1774

1774

Net loss

$/10y

-9855

-4041

.

Throughput/y, year 1

kWh/y

4928

4928

Degradation

10y

0.10

0.10

Throughput/y, year 15

kWh/y

4435

4435

Average throughput/y

kWh/y

4681

4681

Life

y

10

10

Lifetime throughput

kWh/10y

46811

46811

Charging cost

c/kWh

0.211

0.086

INVESTING IN AT&T IS MUCH MORE PROFITABLE THAN INVESTING IN POWERWALLS

 

The AT&T stock price is about $30, and the dividend is $2.08/share, for a yield of 6.93%/y.

AT&T increases its dividend by about 2%/y.

Assume the stock price increases at 5%/y.

No reinvesting of dividends.

 

The investor would have a value of $23,403.14 at end of year 10

The battery owner would see his $9,800 battery system go down in value from day 1.

 

Table 6/AT&T

No Reinvest

9800

Price incr.

Value

Div.

End of year

30

5%/y

$/sh.

$

Div./sh.

$/y

326.667

30.0

9800.0

1

326.667

1.05

31.5

10290.0

2.08

679.47

326.667

1.05

33.1

10804.5

2.12

693.06

326.667

1.05

34.7

11344.7

2.16

706.92

326.667

1.05

36.5

11912.0

2.21

721.06

5

326.667

1.05

38.3

12507.6

2.25

735.48

326.667

1.05

40.2

13132.9

2.30

750.19

326.667

1.05

42.2

13789.6

2.34

765.19

326.667

1.05

44.3

14479.1

2.39

780.49

326.667

1.05

46.5

15203.0

2.44

796.10

10

326.667

1.05

48.9

15963.2

2.49

812.03

Dividend

7439.97

Share value

15963.17

Total

23403.14

APPENDIX 1

The NE grid is divided in zones, each with LMPs* that vary minute by minute throughout the year.

 

* LMP = locational marginal price.

 

The cost of the electricity loss of batteries depends on when the batteries were charged.

 

If charged from 10 pm to 6 am, the LMPs would be about 2.5 - 3.5 c/kWh

If charged around noontime, the LMPs would be about 6 - 7 c/kWh

If charged during late afternoon/early evening (peak demand hours), the LMPs would be about 7 - 8 c/kWh

 

APPENDIX 2

Edmunds, in California, has been performing a long-term road test of a Tesla Model 3 since January 2018. Here are the latest results from the Edmunds website.

https://www.edmunds.com/tesla/model-3/2017/long-term-road-test/2017...

 

A recent road test of the Tesla Model 3, performed by Edmunds, showed 1388 miles of driving in California, some of it on hills

 

- Wall meter consumption was 30.2 kWh/100 miles.

- Vehicle meter consumption was 25.17 kWh/100 miles.

- The charging/resting time loss was 16.7% to 21.29%, much greater than the 15% assumed in these articles.

http://www.windtaskforce.org/profiles/blogs/replacing-gasoline-cons...

http://www.windtaskforce.org/profiles/blogs/replacing-gasoline-cons...

- The charging/resting time loss was over 20% with different drivers and different road trips.

- EV drivers know little of the charging/resting time loss; they rely on the lower numbers of the EV meter.

- February, March and April were not shown, because of missing data. See table 6 and URL

https://insideevs.com/monthly-plug-in-sales-scorecard/

 

Table 7/Tesla Model 3

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Odometer

1388

2922

3937

5237

6009

6659

7679

9329

10307

11174

Test travel, miles

1534

1015

1300

772

650

1020

1650

978

867

Wall meter, kWh/100m

Lifetime average

30.20

30.90

31.70

31.70

31.40

31.80

31.70

31.00

31.10

30.80

Veh. meter, kWh/100m

Lifetime average

25.17

24.83

25.03

25.09

24.76

24.70

24.49

Best fill, period

20.00

28.50

28.60

28.00

26.70

25.60

25.60

Best fill, lifetime

25.60

25.60

25.60

25.60

25.60

25.60

25.60

25.60

25.60

25.60

Charge/rest time loss

5.03

6.57

6.77

6.61

6.24

6.40

6.31

Charge/rest time loss, %

16.66

20.92

21.29

20.85

20.13

20.58

20.49

APPENDIX 3

Validating the Amortizing Method: The amortizing method of determining battery energy costs can be applied to wind and solar systems as well.

 

Its validity can be demonstrated by applying it to a private investor-owned, 1000 kW, field-mounted PV solar system, of which the production would be sold to GMP, a Vermont utility owned by a Canadian/French company, under the Vermont Standard Offer program, at about 11 c/kWh for 25 years, after a competitive bidding process.

 

- Competitive SO bid prices for PV solar are well known. See note.

- The capital cost is amortized at 9%/y over 25 years. That percentage is used, because electric utilities, as regulated companies, and owners usually earn at least 9%/y on invested capital.

- Applying an effective capital reduction of 57%, due to subsidies, leads to electricity costs, c/kWh, close to recent SO bid prices. See table 7

 

The bid SO prices have been gradually decreasing from 30 c/kWh about 7 years ago to about 11 c/kWh in 2018, due to:

 

- The continued decreasing trend of turnkey capital costs. That decreasing trend appears to have bottomed out in New England.

- The various subsidies, direct and indirect, effectively reducing the capital cost by at least 57%.

 

Table 8 shows:

 

- The electricity cost is 25 c/kWh, no subsidies

- The electricity cost is 10.8 c/kWh with 57% subsidies, which is close to recent SO bid prices of about 10.97 c/kWh. See note and URl.

 

NOTE: The MartinBrookPV project, placed on line December 2018, receives 10.97 c/kWh for its production for 25 years under the Vermont SO program.

http://www.vermontstandardoffer.com/sop-production/2018-standard-of...

 

NOTE: No economic cost ever disappears, per Economics 101. The various subsidies merely shift costs from owners to the general public; a political smoke and mirrors game to make solar (and wind) look good. The owners can claim: “Solar (and wind) is competitive with fossil”. Nothing would be further from the truth.

Table 8/PV Solar

No Subsidies

50% Subsidies

57% Subsidies

System capacity, kW

1000

1000

1000

Capacity factor

0.145

0.145

0.145

Hours/y

8766

8766

8766

Life, y

25

25

25

Degradation, 13.9%

0.139

0.139

0.139

.

Production year 1, kWh/y

1271070

1271070

1271070

Production year 25, kWh/y

1094137

1094137

1094137

Average production, kWh/y

1182604

1182604

1182604

Lifetime production, kWh/25y

29565091

29565091

29565091

.

Turnkey capital cost, $

3000000

1500000

1290000

Amortizing at 9%/y for 25 y, $/mo.

25176

12588

10826

Lifetime payments, $

7552800

3776400

3247689

.

Cost, $/kWh

0.255

0.128

0.110

APPENDIX 4

PV Solar Plus Battery: Below is a table with turnkey capital costs to give New Englanders some idea of the financial impact of “going green”.

 

The PV solar system, 5.6 kW, is the same for two battery alternatives:

- One Powerwall 2.0 unit

- Two Powerwall 2.0 units

For each alternative, the turnkey capital costs are determined for AC-coupling

 

The distinction between DC and AC coupling determines whether the battery stores power directly from the PV panels or first converts it to AC power and then stores it. The AC coupling is more versatile, as it allows AC charging from both the PV panels and the grid.

 

Table 6 shows turnkey capital costs. Those costs will vary depending on where the systems are located in the US.

https://www.greentechmedia.com/articles/read/how-much-does-a-roofto...

Table 9/PV Solar + Battery

Capacity Cost

AC Coupling

$/kW

$

PV system

5.6 kW

3800

21280

Powerwall 2.0

5 kW/13.5 kWh

9800

AC coupling

1800

PV + Battery at the same time

32880

3500

Total, if battery is added later

36380

.

PV system

5.6 kW

3800

21280

Two Powerwall 2.0s

5 kW/27 kWh

19600

AC coupling

1800

PV + battery at the same time

42680

3500

Total, if larger battery is added later

46180

APPENDIX 5

ECONOMICS OF UTILITY-SCALE BATTERY SYSTEMS FOR DUCK-CURVES

https://www.windtaskforce.org/profiles/blogs/economics-of-utility-s...

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Comment by Willem Post on February 2, 2019 at 11:43am

Dan,

Thank you for your comment.

I made some changes and additions and refinements as a result

Comment by Dan McKay on February 2, 2019 at 8:17am

 Many of the new schemes from the alternative energy(AE) groups are leveraging high cost devices against peak hour wholesale energy prices. Once the low lying fruit is taken, the shaving of peak energy leads to lower prices, the erosion of reliable plant outputs and higher distribution prices ( unless the AE owners are made to paid for use of distribution in conjunction with the loss revenue to distribution with behind-the-meter generation). 

   The first fight in Augusta is the re-establishment of net billing, which, for rooftop solar generation, is , by far, the most lucrative arrangement and doesn't need batteries.
Comment by arthur qwenk on February 1, 2019 at 8:53pm

Such a deal!

Only the energy legislators of Maine would consider it.

Hannah Pingree on the Maine expedited wind law

Hannah Pingree - Director of Maine's Office of Innovation and the Future

"Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine."

https://pinetreewatch.org/wind-power-bandwagon-hits-bumps-in-the-road-3/

 

Maine as Third World Country:

CMP Transmission Rate Skyrockets 19.6% Due to Wind Power

 

Click here to read how the Maine ratepayer has been sold down the river by the Angus King cabal.

Maine Center For Public Interest Reporting – Three Part Series: A CRITICAL LOOK AT MAINE’S WIND ACT

******** IF LINKS BELOW DON'T WORK, GOOGLE THEM*********

(excerpts) From Part 1 – On Maine’s Wind Law “Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine if the law’s goals were met." . – Maine Center for Public Interest Reporting, August 2010 https://www.pinetreewatchdog.org/wind-power-bandwagon-hits-bumps-in-the-road-3/From Part 2 – On Wind and Oil Yet using wind energy doesn’t lower dependence on imported foreign oil. That’s because the majority of imported oil in Maine is used for heating and transportation. And switching our dependence from foreign oil to Maine-produced electricity isn’t likely to happen very soon, says Bartlett. “Right now, people can’t switch to electric cars and heating – if they did, we’d be in trouble.” So was one of the fundamental premises of the task force false, or at least misleading?" https://www.pinetreewatchdog.org/wind-swept-task-force-set-the-rules/From Part 3 – On Wind-Required New Transmission Lines Finally, the building of enormous, high-voltage transmission lines that the regional electricity system operator says are required to move substantial amounts of wind power to markets south of Maine was never even discussed by the task force – an omission that Mills said will come to haunt the state.“If you try to put 2,500 or 3,000 megawatts in northern or eastern Maine – oh, my god, try to build the transmission!” said Mills. “It’s not just the towers, it’s the lines – that’s when I begin to think that the goal is a little farfetched.” https://www.pinetreewatchdog.org/flaws-in-bill-like-skating-with-dull-skates/

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