It’s getting closer, but it’s not quite there yet. Tesla’s home battery system is a major advance on competing offers though it still doesn’t make straightforward financial sense.
The company announced a 10 kWh battery at a price to installers of $3,500. It comes with a highly impressive 10 year guarantee and a maximum flow rate of 2 kW, enough to power the average UK home (except when the tumble drier and kettle are working together).
What would be the financial implications of purchase? The first thing to note is that the system is being sold as a storage system for surplus solar power. But actually in the UK the logical use for the unit is as a way of storing cheap overnight electricity and using it during the day. The Economy 7 pricing system offers very cheap energy between about midnight and 7am. The battery owner would take up power during the night and use the electricity during the day.
I looked at E.ON’s current tariff for Economy 7. It charges about 5.2p per kilowatt hour, compared to 13.8p per kWh on a standard tariff. To use the battery most cost effectively, the owner would buy 10 kWh overnight for 52p and use it during the day, not spending £1.38 as a result and therefore saving £0.84 a day or about £300 a year.
This maximum saving is only achieved when the house uses exactly the 10 kWh capacity of the battery each day. If it uses more the householder will have to stump up for more expensive daytime power. If it uses less the home won’t get the full saving.
When the Tesla unit becomes available in the UK, what will it cost? If the current price to installers in the US is $3,500, it’ll probably cost around $4,500 fitted in the home, if there’s already a AC/DC inverter such as comes with a PV installation. (It looks a simple job to put it on the garage wall next to the meter). In the UK, the cost will be burdened by VAT and import tariffs. I guess it will be available here for a minimum of £4,000 to solar panel owners with inverters.
So the offer to the UK householder will a ten year guarantee of making a maximum of £300 a year after handing over at least £4,000. The price will have to halve to make this a remotely reasonable financial deal.
Of course it is not all about yearly savings. The battery functions as a back-up power supply, meaning the house will still have electricity even in the event of grid failure. And many people have such a hatred of the electricity supply companies that they will pay a high price to reduce their bills. But for most people the Tesla battery is no more of a realistic proposition than the Tesla car.
That’s the bad news. The good news is the extraordinary rate of progress that this innovation represents. A few months ago the UK home battery maker Moixa started selling its Maslow system at a price of around £2,000 for 2 kWh or about two and a half times today’s Tesla cost per kilowatt hour. Sonnenbatterie, the European market leader, is charging about $10,000 in the US for a 4.5 kWh system, a five times multiple of the Tesla installed price. No wonder the German company admits it makes little financial sense to buy a domestic battery, even when faced with high Californian electricity costs.
Tesla’s heady price will pull down battery costs across all size ranges. In a little-noticed part of the Tesla press release the company talked extensively of its partnerships with large electricity users such as Amazon data centres. The economics of these applications will be better because of the value of 1 MWh batteries to the local grid, the increasing importance of being able to complement local sources of renewable energy and the financial value of shaving peak demands. (Large users generally pay a substantial annual charge based on their maximum electricity use and batteries can reduce this).
Home electricity storage still doesn't quite make financial sense; batteries installed at large electricity users or generators probably do. And, of course, a Tesla system installed in a country without an electricity grid will be a life-changer.
(Unrelated note: my forecasts for daily solar PV output in the UK, using weather forecasts and installation data for 98 geographic areas, are now available at www.solarforecast.co.uk. Any thoughts gratefully received at chrisATcarboncommentary.com.)