How Tesla’s Powerwall Will Shift
Control to the Consumer
Independence
from the electricity grid, clean energy, cost savings and flexibility in power
source — all of that may have gotten a boost last week. The catalyst was San
Carlos, Calif.-based Tesla Motors, which launched a line of energy
storage batteries that it will sell directly to consumers. Elon Musk, Tesla’s CEO who is best known for pioneering
Tesla’s electric cars, has now surprised industry watchers with
the pricing for the storage batteries. They are set to get cheaper as
production scales up — a crucial hurdle to making battery storage technology
affordable — although it is too early to tell where the market will level out.
Tesla’s Powerwall
brand of batteries are priced at $3,000 for a capacity of seven kilowatt-hours
(kwh) and $3,500 for 10 kwh, excluding costs of an inverter and installation.
The battery is designed to be used as a backup during grid outages for
residential users, but it could be just as useful for commercial users and
serve as an alternative for energy utilities.
A
Paradigm Shift
“The paradigm shift we
are seeing now is that consumers have stopped being this dumb agent, where they
receive a fixed electricity price and then consume at will,” said Ruben
Lobel,
Wharton professor of operations and information management. “But this [storage
battery] along with other innovations like the smart grid are putting the
consumer in the forefront as a smart agent.”
The
storage battery industry now has the potential to leapfrog from annual revenues
of $200 million to become a multibillion dollar industry, according to Madhur
Behl, a
doctoral candidate in University of Pennsylvania’s School of Engineering and
Applied Science.
Lobel and Behl
discussed the implications of storage battery innovations for residential and
commercial users, and utilities, on the Knowledge@Wharton show. Lobel explained
that storage battery innovations can help make for smarter customers as they
can respond to grid outages or help make choices in consumption during peak and
off-peak hours. “The grid [cannot] just push whatever it wants on the consumer.
Utilities are scared of losing that power,” he noted.
Is
the Price Right?
The concept of using
batteries for residential and commercial buildings and even utilities has been
around for some time now, said Behl. “The real question is, have they gotten
the price point right, and have they managed to make it into a package that is
really affordable and scalable?” He added that the total cost could swell to
twice the battery price, including the costs of an inverter and installation.
Adoption of storage
batteries could get a boost from lower prices, which increased production could
facilitate. Lobel noted that Musk had committed a third of the capacity at
Tesla’s Gigafactory in Nevada to storage batteries (with the rest for car
batteries). The $5 billion factory is now under construction and planned to be
operational in 2017.
Lobel said consumer
demand for storage batteries will vary by market and local regulations. For
example, the batteries could be a useful alternative in markets where solar
panel users can sell excess electricity to the local grid at retail prices. In
some markets, solar panel users face resistance from utilities who try to push
back with extra surcharges, he explained. “With these batteries you can rely
less on the grid,” he said.
The storage batteries
will find more success in markets with high energy prices, Lobel noted. “In
California, this will probably be viable given the high electricity prices in
the top tiers. [However,] in Texas with [energy costs of] four cents per kwh,
maybe it won’t pay for itself just yet.”
Behl expected the
storage batteries to see the highest adoption among large commercial buildings,
although there could be some early adopters in the residential sector as well.
He explained that large commercial buildings typically face a “demand charge”
from power generation companies, or a levy proportionate to their consumption
during peak hours.
Overcoming
Uncertainty
“There is a saying in
electricity generation circles — ‘All kilowatts are not created equally,'” said
Behl. “As the load increases through the day, the generator has to rely on
older and more inefficient sources of electricity, which is why it is more
expensive.”
Such users could
charge their storage batteries at night or during off-peak hours and then use
that storage during peak hours, Behl explained. They could also participate in
demand-response programs many utilities offer where they pay users incentives
to curtail peak-time energy consumption.
The University of
Pennsylvania participates in such a demand-response system, said Lobel.
Whenever electricity prices spike, it gets a call from its regional
transmission operator and responds by reducing the use of high-energy devices
like chillers and so forth. “The thermostats of the entire campus get adjusted
to respond and reduce the load on the system.” Businesses can similarly respond
to demand spikes, and the batteries will help as alternatives, he added.
Lobel and Behl also
agreed with Musk’s observation that battery technology could trigger
fundamental shifts in how people think of energy use. “Solar or renewable
energy sources are erratic. There is no guarantee, although [as Musk] said, the
sun shows up on time every day. What we don’t know is whether or not there will
be clouds.” Similarly, wind power facilities face uncertainty in that the wind
can die out, he noted.
“Putting a battery at
the end-user’s point will smooth out this uncertainty,” said Behl. Any
electricity such users generate and do not use during the day can be backed up
and become available night, he added. He noted that the advent of storage
batteries could be good news for utilities as well. “They might not like the
fact that the consumer is not buying electricity from them all the time, but it
makes the demand less volatile,” he said.
http://knowledge.wharton.upenn.edu/article/how-teslas-powerwall-will-shift-control-to-the-consumer/
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