Tesla Motors Inc. CEO Elon Musk unveiled a line of home and industrial battery packs at an event late Thursday afternoon. Musk said that Tesla is “trying to change the fundamental energy infrastructure of the world.” Although the system announced appears favorable compared to the numerous competitor’s battery solutions currently offered, Tesla’s high reliability stand-by power is much more expensive than generators and has a commercially unfavorable investment recapture period of eight to ten years.
Tesla’s “power-wall” stand-by electricity storage announced Thursday by CEO Musk is a repackaging of the company’s lithium ion automotive battery packs. The electricity-storage devices for homes, businesses, and utilities are being promoted for their ability to provide a buffer to absorb excess solar and wind energy from “sustainable” alternative energy systems.
The market for electricity storage has remained small, but could grow quickly. Last year only about $128 million worth of such batteries were installed around the country, mostly at utilities, according to GTM Research, which tracks the renewable energy industry. For Tesla as a company with about $3.2 billion in auto sales already, the storage market is still in its infancy.
Just one percent of the electrical back-up battery pack capacity was installed in homes last year due to substantial risks of fires from lithium batteries that have a nasty reputation of sometimes exploding. The only reason insurers are not charging exorbitant premium rates for home electric battery back-up is because the market is small and the Obama administration is supportive.
Tesla will offer a 7 kilowatt-hour system for $3,000 and a 10 kilowatt-hour battery pack for $3,500. The battery packs come with controllers that can automatically toggle between batteries and a solar panels or wind turbineenergy source. The devices feature a 10-year warranty and can be easily installed on a wall near any electrical panel. Special controllers. Since the average house creates an electrical load of 2 to 5 kilowatts, the packs could power a home on a stand-by basis for a few hours.
Batteries are only a small piece of the total cost of a solar/storage system. An integrated system includes solar panels, batteries and inverter, smart controls, building permits, labor, and other costs that can add up to $20,000 or more.
Tesla’s battery back-up units do incorporate liquid cooling systems as a safety feature that make what engineers call a “thermal runaway” event that could lead to a fire extremely unlikely. The only risk would be a house fire that gets hot enough to ignite the lithium cells. The few rare fires that have occurred in Tesla’s cars were believed triggered by physical damage to the battery pack—a much less likely scenario in a home electrical back-up installation.
After depreciation and California’s top in the nation alternative energy tax credits, Musk announced that the effective cost for installing Tesla electric back-up and the other equipment necessary for an operating system would be at the low end of the energy storage market’s current price range of $800 to $2,000 a kilowatt-hour. But GTM Research analyst Ravi Manghani said, “Those industry installation prices need to drop by half or more, to less than $500 a kilowatt-hour to attract a lot of demand, he predicted.”
Using Manghani analysis, it would take a Tesla battery pack purchaser about eight to ten years to economically recapture an investment versus ten to twelve years for the current systems available. That price point is more favorable in comparison to the current competitors, but GTM believes the price would have to fall to a three to five years recapture before the mass consumer market will invest in what is essentially standard RV battery technology that has been available for years.
According to The Wall Street Journal, Sungevity and Sunrun Inc. already offer consumer battery systems to back-up with home solar panels at prices competitive with Tesla’s. For bigger users, companies including Sunverge Energy, Inc., Stem, Inc. and Green Charge Networks offer lithium-ion batteries made by LG Chem and Samsung, with various financing options. Another group of companies sells what are known as flow batteries, which are more common for very large users like utilities.
Tesla hopes that its electrical power solution will be attractive for global climate change enthusiasts to back-up their wildly inefficient solar and systems with uninterruptible electric power for their conventional LED lights, security systems, and refrigerators.
Tesla’s shares (TSLA-NASDAQ) rose on the rumors of the upcoming battery-pack announcement by about 6% in the days leading up to the release. But Tesla stock ended trading almost unchanged on Friday at $225.96, down nine cents.