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Game Changer?

Will Tesla's new storage solution live up to all the hype?

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The units can be fitted in sequence for larger energy needs
The units can be fitted in sequence for larger energy needs

Tesla’s new Powerwall storage solution has been tipped to revolutionise the way we use power and put utilities on the back foot. Will it live up to the hype?

There has been a huge amount of hype surrounding the Tesla Powerwall since the electric car vehicle maker unveiled its new energy storage solution in a blaze of publicity in April.

Chief executive Elon Musk has championed the sleek device as the future of home energy storage solutions, a game changer for utilities and the renewable energy sector that will revolutionise the way we produce and consume power.

Is this really the breakthrough that will allow homeowners to store power generated with their own solar panels for use during the evening? Those in the know don’t seem ready to get carried away by with the hype just yet.

RECAP
At a presentation reminiscent of Apple legend Steve Jobs, Tesla Motors chief executive Elon Musk unveiled his company’s new home energy storage solution amid claims it will accelerate the shift away from fossil fuels towards a sustainable energy future.

The Tesla Powerwall is a rechargeable lithium-ion battery designed to enable homeowners as well as businesses and utilities to store renewable energy to manage power demand, provide backup power and increase grid resilience.
Starting at $3,000 for a 7 kWh unit it is thought the package could be as little as a third of the price of comparable products previously available on the market.

Tesla’s lead installation partner for the home battery kit will be SolarCity Corp, a company also backed by Musk.
As well as the lithium-ion battery, the package also consists of a liquid thermal control system and software that receives dispatch commands from a solar inverter.

The unit can be mounted on a wall inside a garage or on the outside of a building and is integrated with the local grid to harness excess power and give customers the flexibility to draw energy from their own reserve.

Powerwall is available in 10kWh, optimized for backup applications while the 7kWh is marketed for daily use applications, though both can be connected with a rooftop solar package as well as the grid and can provide backup power.

Multiple batteries may be installed in sequence for homes with greater energy needs. This is limited to a total of 90 kWh for the 10 kWh pack and 63 kWh for the 7 kWh battery.

When paired with solar power, the 7kWh Powerwall can be used in daily cycling to extend the environmental and cost benefits of solar into the night when sunlight is unavailable.

Palo Alto-headquartered Tesla will initially manufacture the batteries at its motor factory in California but will move production to a purpose built factory in Nevada next year.

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THE VERDICT
LUX Research – Dean Frankel, Research Associate – Energy Storage technologies

Tesla and its supplier Panasonic need new markets to sell to, and the burgeoning stationary energy storage market is a ripe target – but it will need more help to succeed, says Dean Frankel of Lux Research.

Cheap cells made in the Gigafactory are only part of the puzzle. Unlike electric vehicles, in stationary batteries there is more of a relative cost contribution coming from power electronics, software, and installation.

Without more vertical integration – and perhaps even some acquisitions and Gigafactory-like efforts dedicated to inverters – Tesla is limiting its growth potential here.

The distributed energy storage space already has many players offering standalone and solar-connected battery systems, so Tesla is certainly not the first to market.

However, the electric vehicle maker does have key product scaling benefits afforded to few of its competitors, through its relationships with Panasonic for lithium-ion cells and SolarCity, the largest residential solar installer.

Still, in order for Tesla to see success, the EV maker must tackle three key areas. Firstly it must reduce the cost beyond Li-ion cells. At $350/kWh, Tesla is the industry’s current price leader for stationary Li-ion packs, thanks to its partnership with Panasonic and its upcoming Gigafactory.

However, consumers will also need to pay for an inverter, installation, and other costs, which altogether will nearly double the $3,000 price of Tesla’s entry-level Powerwall unit. Tesla will need to push their power electronics and installation partners to cut their costs further – or do that itself, either in-house or via acquisitions.

Secondly it will need to offer financing and new residential business models. Tesla and SolarCity have relied on California’s self-generation incentive program (SGIP) for the majority of its systems to date. However, SGIP is an unsustainable model in the long term.

Tesla has to establish new business models beyond residential load shifting, to open up all U.S. and international markets. Moreover, Tesla’s stated goal of selling 30% of its output from the 50 GWh Gigafactory to stationary markets implies about $3.7 bn in revenues in 2020. Providing financing options for many of those purchases will be key, echoing the successful strategy that solar has already employed.

Thirdly, the company will need to work with utilities, not against them. As more distributed solar comes onto the electric grid, utilities are increasingly at odds with consumers and companies like SolarCity.

Energy storage can turn distributed generation into a utility asset, but only a few utilities have explored owning and controlling smaller residential and commercial systems. For Tesla to truly impact the stationary market, it will need to work with utilities and grid operators to ensure its solar and storage solution can be a key grid management tool.

Tesla has succeeded in pushing down cell and pack costs for stationary energy storage, which will accelerate this market. However, power electronics, installation, and widespread availability of financing remain open questions.

The quicker Tesla can build partnerships, make acquisitions, and invest further to address these issues, the better its chance of hitting its hugely ambitious goal of selling 15 GWh of stationary energy storage in 2020.

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Frost & Sullivan - Ravi Krishnaswamy, Vice President, Energy & Environment
Elon Musk’s launch of Powerwall has attracted high interest and attention as perhaps the energy industry’s equivalent of what Steve Jobs achieved with the iPad launch. But will this product be a real game changer as an iPad or even an iPod?

For beginners, lithium ion battery technology and the product concept behind Powerwall are not new. The idea of storing the sun’s energy and the fancy of going off the grid have been widely talked about and experimented, though on a much smaller scale.

However, Tesla’s grand plans and the go-to-market approach it may eventually adopt will differentiate. Can Tesla’s Powerwall succeed and be a real game changer?

The sleek design, attractive packaging, and intelligent interface, which the Powerwall promises to offer, will be enticing to early adopters such as technology and green energy enthusiasts, affluent remote users, and big utility antagonists. The wide range of modular products, starting from a 7 kWh residential unit to large industrial and utility scale storage systems, offers the choice and flexibility to a variety of users.

The gigafactory that Tesla is building to assemble battery packs of 50 GWh/year by 2020 will help reduce the cost.

However, the global battery production capacity is ramping up fast, and several Asian companies will start giving stiff competition to Tesla, both in the United States and the Rest of World. It is only a matter of time before knock-off products are available, and with those come the quality issues. Too many low-priced and low-quality products may kill the customer’s enthusiasm and thus the market, even before it takes off.

The distribution channel and partnership ecosystem that Tesla is developing to sell and service its products will be the ones to watch, depending to a large extent on how the company will differentiate, innovate, and stay ahead of the competition curve.

New cost competitive battery chemistries will emerge and may take the wind out of the lithium ion battery’s sails. The fast charging graphene-based batteries and super capacitors could be even more disruptive. Thus, being storage technology agnostic but focusing on the solution integration and application development will be a key success factor for companies such as Tesla, which plans to create a revolution in the traditional utility industry.

Policies and regulations, both enabling and punitive, will play a role as well. Support and mandates for rooftop solar and energy storage such as those in California will no doubt propel the market. Once the product becomes mainstream, stringent regulations for battery disposal and recycling will demand more industry capacity and integrated logistics, which will create its own set of challenges and opportunities.

Parallels have often been drawn between the distributed off-grid energy and mobile telecoms, both of which have a leapfrogging effect, especially for the large unconnected populace in the developing world. For this to happen, the utility sector will have to reinvent itself by adopting new technologies and by pushing some of its functions downstream, to involve customers.

Companies such as Tesla may be unable to bypass completely the utilities at a global level as renewable energy is intermittent and storage technologies are still nascent. Thus, in a smart move, Tesla is intricately involving the giant utilities in its strategies by developing large batteries that would help better manage its grid, rather than solely focusing on taking people off the grid.

Will products such as Powerwall be the one to give ‘power’ to the people? The answer could perhaps be yes in the literal sense. Will it disrupt the industry in the same way as the iPad? Perhaps not!

Facts:
- $3,000 basic cost of the Powerwall
- $3.7bn revenues Powerwall could generate for Tesla in 2020

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