Friday, May 8, 2015

Economics of the Tesla Powerwall

The latest Tesla hype is about the Powerwall, which they say will transform electricity consumption and could lead to a zero-emissions energy cycle! Here is a back-of-envelope kind of calculation to put things into perspective.

The 10-kwh Powerwall retails at $3500. Let's assume after taxes and installation you pay $4500. So you need to save at least that amount in energy costs over the lifespan of the battery. They're being warranteed for 10 years, so we'll call that the lifespan. The average cost of electricity in the US is $.12 / kwh.

(1) The number of generated kwh needed is: $4500 / $.12 = 37,500 kwh
(2) The number of cycles is: 37,500 / 10 kwh of storage = 3,750
(3) Since each day is once cycle, we break even at: 3,750 / 365 = 10.27 years

That's longer than the lifespan of the battery. So the rough conclusion is you'll never break even. Let's look at the assumptions and how we could get a more accurate calculation.

Negative Assumptions (assumptions that make the result seem worse than it is)

- assumed the 10-year warranty is the same as the lifespan. We expect a product to last, on average, longer than it's warranty (by definition it can't be less). But I'm having trouble finding any actual data for performance degradation. Lithium-ion batteries lose some amount of performance with each charge-discharge cycle.

Positive Assumptions (assumption that make the result seem better than it is)
- Assumed no performance degradation in the battery
- Assumed perfect efficiency in the inverter and battery
- Assumed full recharge every day (maybe seasons and weather conditions will not always permit this)
- The big one, assumed you already have a solar panel capable of 10 kwh/day. An online caclulator I found estimates such a system at $8800 installed. And this is not a one-time purchase: their performance degradation is about 1% per year. So you're losing at least $88 per year just having the thing up there. In reality the cost of maintaining the panel will be higher.

I'd like to set up a model that takes all these factors into consideration and solve it numerically, but it's been a while since math. And the obvious outcome will be that the Powerwall / solar setup is not going to be anywhere near cost effective. To people who might say it's worth to pay more to save the environment: you need to consider the environmental impact of manufacturing the solar panel, of manufacturing the battery pack, of mining the metals that go into both, and the environmental impact of disposing of the battery (lithium-ion batteries are not recycled). Clearly the notion of zero-carbon power is ridiculous.

The solar industry, like the electric vehicle, depends heavily on government subsidies. The Powerwall is the same business model as the Tesla vehicles: luxury products for the affluent funded by the taxpayer. It's not economical, it's not environmental, and it's more welfare for the rich.