image credit (C) Ralph Larmann for the LICHTGRENZE project, tracing the path of the Berlin Wall in light – used with permission
By Bruce Lin with Matthew Klippenstein
We continue our analysis of Tesla’s stationary energy storage business with a closer look at the German residential market, and provide a tool for you to try your own numbers. (Part 1 is here).
First, Danke to Germany for catalyzing the growth of solar PV through its feed-in tariffs and driving panel costs down for the rest of the world. As PV prices have come down, the feed-in-tariff that panel owners earn for selling solar power to the grid has also declined from over €0.50/kWh in 2000, down to about €0.11/kWh today (residential small-scale).
That’s far below Germany’s relatively high average residential purchase price of €0.29/kWh, which includes a variety of grid charges, including the shared cost of those earlier feed-in tariffs. The feed-in-tariff is scheduled to shrink further over time, and a new auction scheme may drive it down even further. (German Energy Blog has a good summary of the relevant policy).
If storage helps you buy less electricity from the grid – effectively raising the value of your solar electrons from €0.11/kWh to €0.29/kWh — could this be the perfect application for Tesla’s Powerwall?
Chart of decreasing Solar PV FIT from Deutsche Bank Climate Group, used with permission
We run the numbers in a simple cost payback model. Here are our default numbers and assumptions:
- The solar panel is sized so you have enough surplus power to store 7kWh of power in the Powerwall, 365 days a year.
- The system efficiency assumptions are 92% round-trip DC-DC as specified by Tesla; 97% one-way inverter efficiency in going from solar DC to the grid AC; and effectively 100% efficiency in going from the solar panel DC output to the DC-DC converter’s input (this is one big advantage of having the DC-DC converter)
- You sell power back to the grid at a fixed rate of $0.12/kWh, and buy from the grid at a fixed rate of $0.34/kWh (no time-of-use pricing).
- The 7 kWh DC rating is for discharge and you can consume all the discharged energy every day
- Discount rate of 3%
- The Powerwall maintains its efficiency and capacity over its entire 10-year lifetime.
- The Powerwall costs $3,000 plus $1,500 of taxes and installation cost, and is fully compatible with the existing solar inverter.
Companies often set warranty terms to ensure that fewer than 2 percent of units fail within the warranty period. If Tesla is using a similar strategy, fully 98 percent of Powerwalls may still be operating in year 11, and many units for years beyond that. To simplify things, we’re assume that the probably-longer-than-ten-year life balances out whatever derating the product might suffer under daily cycling.
See the footnote for other, more detailed assumptions. These inputs go into our calculator below, and we’ve made it open so that you can try your own numbers:
Our test case is where you have the solar panel and buy a Powerwall, store 7 kWh DC of surplus solar energy per day, then self-consume it as AC electricity (6.79 kWh AC after inverter losses). This means every day, you buy 6.79 fewer kWh AC from the grid at the higher $0.34 price. This earns a net present value of $2,816 over 10 years (in constant 2015 dollars). Levelized cost of energy is $0.18/kWh, which is just the cost of the battery amortized over its life – the solar energy input is “free”. Positive net present value means you get a return, but it needs to be compared against the alternative.
That means the baseline case, where you already have the solar panel, but don’t buy the Powerwall. As a result, you sell that surplus solar power directly to the grid at the $0.12 rate. After currency exchange and this earns a net present value of $2,911 over 10 years (again, in constant 2015 dollars).
The difference is so small with these assumptions, that buying the Powerwall basically breaks even versus not buying one. As prices come down and installers compete to install the product, it looks to be even more viable on a purely economic basis. Add to that the benefits of having backup power and it starts to look like a good buy for consumers. (You can also add additional Powerwalls to increase return, but the model is valid only if you have enough surplus solar to fully cycle them every day of the year, and if you can consume all the stored energy).
This is different from the American peak shaving case in our previous article. In that one, a battery and inverter were being added to a house with no pre-existing solar panel or inverter, increasing cost. On the revenue side, PG&E Time-Of-Use pricing is only available during summer months, Monday to Friday, so the opportunities for savings are much smaller.
Tesla’s Powerwall $350/kWh (DC) price is a huge step forward, which our calculations show already make sense for some homeowners in places like Germany, as long as installation costs are reasonably low, they own fairly large PV arrays, and are in the relatively sunny parts of the country.
We rarely buy things for strictly economic reasons – Germany’s early adopters, like early adopters everywhere, may be even more motivated by interest in new technology, a drive to improve their household resilience and autonomy, and/or that universal human desire: to really stick it to their utility.
Next up, we’ll evaluate the Powerwall in the Hawaiian context, where conflicts between the local utility and would-be home solar installers is reaching volcanic proportions.
Catalytic Engineering is well-positioned for these sorts of assessments and we’re available for more detailed analysis, competitive intelligence reporting, engineering due diligence projects, etc. in batteries and other system engineering projects – please get in touch at email@example.com
Footnote: detailed assumptions
- Our default numbers imply the solar panel is grossly oversized in the summer, and that German winters are sufficiently sunny.
- The actual Euro prices are €0.11/kWh feed-in-tariff, and €0.30 purchase price, at $1.12 per Euro (May 12 2015 exchange rates)
- The discount rate of 3% is quite low but possibly appropriate for homeowners. Investors and companies would typically have a much higher discount rate, requiring better return from their capital investments.
- Though the battery’s energy storage capacity will slowly decrease over time, we discussed in Part 1 why we thought the Powerwall was oversized to deliver the promised capacity.