The introduction of the Powerwall, Tesla’s new battery, will change the global energy equation fundamentally, writes John Mathews, Professor of Strategic Management, at Macquarie University in Australia. This is because it will make renewable energy “the new normal” and will put fossil fuel companies on the defensive. Instead of asking “can we have our own energy system?” communities will be asking “why can’t we have it?”
While wind and solar power have made great strides in recent years, with renewables now accounting for 22% of electric energy generated, the issue that has held them back has been their transience. The sun doesn’t shine at night and the wind doesn’t blow year-round – these are the mantras of all those opposed to the progress of renewables.
Now the renewable power billionaire Elon Musk has just blown away that final defence. Last Thursday in California he introduced to the world his sleek new Powerwall – a wall-mounted energy storage unit that can hold 10 kilowatt hours of electric energy, and deliver it at an average of 2 kilowatts, all for US$3,500.
The entire electric power grid of the US could be replicated with just 160 million of these utility-scale energy storage units
That translates into an electricity price (taking into account installation costs and inverters) of around US$500 per kWh – less than half current costs, as estimated by Deutsche Bank.
That translates into delivered energy at around 6 cents per kWh for the householder, meaning that a domestic system plus storage would still come out ahead of coal-fired power delivered through the conventional grid.
What’s more, Musk is going to manufacture the batteries in the United States, at the “gigafactory” he is building just over the border from California in Nevada. He is not waiting for some totally new technology, but is scaling up the tried and tested lithium-ion battery that he is already using for his electric vehicles.
Not just for homes
Now the fossil fuel companies – from fuel suppliers such as coal miners to coal-burning electric power utilities – will be on the defensive, fighting the new normal of cheaper renewable supplies and storage. Instead of asking “can we have our own energy system?” communities will be asking “why can’t we have it?”
The Tesla Energy system launched last week is comprehensive, with global ramifications. The Powerwall system offering 10 kWh is targeted at domestic users. It is complemented by a commercial system termed the Powerpack offering 100 kWh storage, and a stack of 100 such units to form a 10 megawatt hour storage unit that can be used at the scale of small electricity grids.
Whole communities could build micro-grid power supply systems around such a 10 MWh energy storage system, fed by renewable energy generation (wind power or rooftop solar power), at costs that just became super-competitive.
At his launch last week, Musk maintained that the entire electric power grid of the US could be replicated with just 160 million of these utility-scale energy storage units. And two billion of the utility-scale units could provide storage of 20 trillion kWh – electric power for the world.
The revolution begins
It is instructive to put these numbers in context. There are already around 2 billion cars and commercial vehicles on the world’s roads, and nearly 100 million new vehicles are being added every year.
If it’s feasible to build these exhaust-pumping complex machines, it’s certainly feasible to build the storage units that will help to make them unnecessary. What’s more, Elon Musk has just announced that he intends to do so.
Elon Musk will not be alone. Already China is gearing up to be the world’s renewable energy superpower
Musk is a Henry Ford-style figure who takes others’ innovations and scales them up, taking the breathtaking entrepreneurial leaps that others can only dream about. Suddenly the world of renewable energy just moved to become the new normal – because when combined with cost-effective storage it becomes unbeatable.
Musk will not be alone. Already China is gearing up to be the world’s renewable energy superpower, with the largest installed base of wind power and probably by this year the world’s largest installed base of solar photovoltaic (PV) power, as well as by far the world’s largest manufacturing system for wind turbines and solar photovoltaic cells.
There are already Chinese companies such as BYD producing their own energy storage units based on lithium ion technology for both domestic and commercial usage – although not as sleek nor as cheap as the new Tesla offering.
But give them time and they will be producing at comparable scale and cost, or bettering it. This is capitalist competition – and its propagation is what makes Tesla’s announcement the start of the real renewables revolution.
No going back
What about Australia and the sorry state of affairs in which the Abbott government can see nothing beyond coal exports and does everything it can to halt the transition to renewables? Tesla’s announcement has just shifted the ground beneath their feet.
No longer can anyone in Australia claim that renewables would be “nice” if only they came with storage. Now they do.
A smart government in Australia would be looking to ride this wave and promote Australian renewable technology as a source of wealth for the country in a post-fossil fuel era.
Finally we would be able to move beyond the fruitless debates in Australia over whether to have a carbon tax or not, and move to the more immediate and practical issue of promoting renewable industry and technology.
China has given the world a huge lesson in the business-like way it has gone about building and promoting its renewable energy industries, importing technology from around the world and now improving on it as well, and scaling up production so as to drive down costs.
Now Musk and his Tesla Energy have just taken that process one decisive further step, to encompass storage as well as renewable power generation. From here there is no going back.
Editor’s Note
John Mathews is Professor of Strategic Management, Macquarie Graduate School of Management at Macquarie University. His most recent book is Greening of Capitalism: How Asia is Driving the Next Great Transformation. This article was first published on The Conversation and is republished here under a Creative Commons licence and with permission from the author.
Maarten says
That translates into an electricity price (taking into account installation costs and inverters) of around US$500 per kWh
It translates into a storage price of 500 dollars per kWh, not an electricity price. It is not the electricity itself they price, they price the storage capacity!
Jeffrey Michel says
Such predications require appropriate scaling. In the United States, 100 million homes are equipped with air conditioners, most of them rated at 3 or 5 kW. How long will Mr. Musk require to match the energy consumption of such contrivances installed for human comfort, and then move on to the processional frozen food corridors in U.S. super markets? If his vision was really durable, then battery gigafactories would already be springing up like mushrooms in Germany. A closer look reveals, however, that even if nearly 100% renewable power generation should be achieved by mid-century in this country, the more significant sectors of transportation and heating will be more difficult to reform. The International Energy Agency reinforces the underlying misconceptions involved with its calculated requirement of up to 3,500 CCS fossil fuel power plants allegedly necessary by 2050 to prevent global warming from exceeding 2 degrees Celsius. In actuality, the embedded trajectories of fossil fuel usage already portend temperature overshooting by 2030, stimulating the production of even more air conditioners. Prof. Mathews’ hope for a smart government in Australia skirts the question of why the country has thus far remained irresponsive to record heat waves and to the ongoing dissolution of the Great Barrier Reef by CO2-induced ocean acidification. I am looking forward to his future articles for an answer.
Mike Parr says
The article glosses over some aspects. PV output in Europe, in winter is not good. Set against that PV’s output month by month is matched (inversely) by wind. Circa 95% of households in Europe consume in the range 2500 – 5000kWhrs/year. A 10kWhr storage system with 70% DOD has a fighting chance of meeting most elec demand in a given HH in the evening – providing the storage is fully charged – mostly the case in late spring, summer and early autumn, mostly not the case in winter. PWR has analysed daily PV outputs (for a UK Camb house) so the above is based on data.
But the above assumes current levels of consumption. Lighting accounts for around 7 to 10% of a given HH elec consumption. CFLs are now giving place to LEDs which will lead to a reduction in load due to lighting of perhaps 80%. White goods account for around 12% of HH elec consumption. Matching white good use to an oversized PV array would further displace/reduce the size of storage (plus further reductions in power consumption due to rising energy standards.
The fact that elec energy consumption is falling year on year in several EU MS (France, UK, Germany Benelux, Spain, Italy) suggests that rising elec’ goods energy efficiency is having an impact – thus making it easier to meet HH demand.
We have a moveable feast, where HH storage has a role – the importance of which remains unclear – key role? Depends on policy. For example, under a policy of net metering which paid an HH “wholesale+avoided network losses+a margin” for each kWhr exported (& did not penalise the HH for self consumption/storage) could see quite a few takers (in Italy & Spain as the two most obvious example). The fact no EU MS has implemented such an approach suggests that they are still in “let’s protect the incumbents” mode. Whilst this exists, PWR does not see storage at the HH or small business level expanding in Europe.
Bill Conlon says
I think Prof. Matthews’ receives a failing mark, at the very least for not showing his work.
How does the Professor justify a claim of ‘6 cents per kWh for the householder’? This is less than the cost of the electricity the householder had to put into the battery in the first place!
Even at $300/kwh total installed cost, the Lazard LCOE study, version 8.0, has the Levelized Cost of Energy from a battery at 16.8 cents per kWh. And the Morgan Stanley Blue Paper would put the total installed cost at $710/kWh — in the ‘Bullish’ case!
So the Professor’s numbers don’t seem to pencil.
Kit P Blessing says
6 – 12 – 18 cents per How cares!!!!
A) It will get cheaper! as time goes on.
B) WE NEED IT !!
Wake up and feel the heat.
Bill Conlon says
When a climate advocate fudges the numbers you don’t care, that it undermines the cause.
I have spend four decades in the power industry caring about climate change, so don’t go telling me what to feel or think.
If you care about solving this problem, you better start caring about the economics.
Jonny B says
The cost of planetary ecosystem failure can only be stated as Infinite. Thus anything that prevents it is, by comparison, cheap, cheap, cheap. Ergo cost analysis becomes irrelevant. We should finance the transition to renewable energy and the environmental clean up by printing money. Once humanity’s future is assured (until the Sun goes nova at least) THEN we can sort out the finances.