How the Tesla Powerwall Works

By: Nicholas Gerbis  | 
The Tesla Powerwall is unveiled on April 30, 2015.
© Patrick T. Fallon/Reuters/Corbis

In April 2015, Tesla Motors sparked a high-tension-wire buzz among solar power users and utility industry wonks by announcing its entry into the home and industrial battery market. The company would offer two home batteries, a 7 kilowatt-hour Powerwall for daily use ($3,000) and a10 kwh version for backup power ($3,500), as well as a scalable 400 kwh commercial/utility battery for large buildings [source: CNN].

Within the first week, the company had piled up 38,000 reservations for Powerwalls and 2,500 orders for larger power packs [sources: Geuss; Randall]. Powering the buzz was the hope that Tesla's new products might jump-start consumer's flagging interest in solar self-storage by rebalancing the cash-per-kilowatt equation in favor of banked energy.

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Reaching that tipping point is essential to solar's future. Although solar technology has made great strides, its chief drawback remains the same: Solar cells must harvest energy while the sun shines. That means until we start parking solar panels in space and beaming power back to Earth, solar users must spend their nights hooking to the grid, consuming generator power or re-enacting pioneer days. Ideally, they could store the day's solar energy to "self-consume" at night, but the batteries currently on the market leave something to be desired.

Mainly, they're too expensive. Costs can reach as high as $600 per kwh of storage, with $100 per kwh marking a kind of industry sound barrier. To put that in perspective, the average American household uses around 30 kwh per day. As of March 2015, the average residential cost for drinking from the grid clocked in at 12.35 cents per kwh, or about $3.71 per day [sources: USEIA; USEIA].

Like the rechargeable batteries in your camera or cell phone, these energy cells can only recharge so many times before they degrade. That gives current household and industrial batteries a life span of around 3-10 years and keeps battery costs high [sources: Aziz; NMSEA]. Many American solar users, both residential and commercial, find that simply selling excess energy to the power grid during the day and buying it back at night pays better [sources: Galbraith; Geuss; NMSEA]. But to the green-minded, this swap, which barters green energy for fossil fuel power, is a vexing devil's bargain.

If the Powerwall gives hope to some solar consumers that a better bargain is in the offing, then it also energizes Tesla's future prospects, both in the automotive and energy markets. To drive down costs for the Tesla Motors side of the business, which currently loses $15,000 per Model S sold, the company needs to get into the battery business in a big way [source: Helman]. A larger demand for Tesla Energy battery technology, some of it built on the same battery backbone as the Model S, could help fund essential factory and R&D facilities. The resulting economies of scale could transform the solar battery market as well.

But not everyone is convinced that the hype is justified, at least not yet.

© 2015 HowStuffWorks, a division of Infospace LLC

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The Need for a Better Solar Battery

There's little question that interest in sun-based power is rising. In 2014 alone, photovoltaic power in the U.S. topped 2013 levels by 6.2 gigawatts. That's a 30 percent bump likely to carry on into 2015, spurred by dropping costs, incentive programs and the rise of leasing plans [source: Cusick and ClimateWire]. In the next five years, solar power will account for more than 50 percent of energy in California (during sunny hours) [source: Randall].

But solar power, like most renewable sources, remains a mixed bag. Just as early panels hardly dribbled enough juice to justify their costs, current storage options only make sense for a small subset of solar users [source: Cusick and ClimateWire]. In remote areas, where grid hookups run to the costly and erratic, even clunky batteries make sense. The same holds true for high-cost, low-consumption countries like Germany, or in Hawaii, where they pay three times as much for energy as mainlanders do [sources: Galbraith; Geuss; Helman; Randall].

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But in the rest of the U.S., energy rates remain cheap enough that most households are better off sticking with the sell-buyback model, a swap first made possible by the Public Utility Regulatory Policies Act (PURPA) of 1978. Intended to reform rate structures, support cogeneration and buoy alternative energy, PURPA also opened the door for smaller entities to challenge energy monopolies [source: NMAH]. An efficient and cost-effective battery could widen that gap, and that's where Tesla comes in.

Currently, German solar patrons spend $2,200 per kwh for storage products provided by the Austrian company Fronius Energy [source: Galbraith]. That includes a large-mini-fridge-sized battery, an energy meter and a large-backpack-sized inverter to convert the battery's direct current (DC) back into alternating current (AC) that the house can use. Compare that to Tesla's sleek, wall-mounted Powerwall, which offers a 7 kwh daily cycle battery for $3,000 (inverter not included), and you begin to see why Fronius has entered into a partnership with Tesla to provide the Powerwall to its customers [sources: Fronius International; Galbraith].

But Fronius and Tesla are far from the only games in town. They face stiff competition from cash-rich, proven companies like Samsung SDI and LG Chem, as well as smaller companies, some of which, like startup Stem, have made inroads with a major utility or two [source: Groom].

As for Hawaii, Tesla plans to offer the daily-cycle battery option in 2016, the same year it moves into the Asia-Pacific region. Solar citizens of the Aloha State, who currently shell out 37 cents per kwh compared to the U.S. average of 12.5, would pay a projected 15 cents per kwh using Powerwall [sources: Geuss; Helman; Randall].

It all sounds promising. So why do some people still harbor doubts?

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The Real Market for Powerwall

Tesla's batteries for businesses and utility companies (pictured here) provided energy for the big Powerwall unveiling on April 30, 2015. Tesla could find success with commercial customers before residential customers.
© Patrick T. Fallon/Reuters/Corbis

Home battery buyers face a problem familiar to alternative power users, namely, that the savings don't offset the costs, at least not yet. Many critics argue that all but the most frugal appliances will quickly gobble up the 2 kilowatts the batteries trickle out, especially when running heaters or air conditioners during brownouts, but not that everyone agrees on that score (see previous sidebar) [sources: Galbraith; Geuss; Randall; Tesla Motors].

Nevertheless, using car batteries to power homes makes sense, and engineers have kicked around the idea since at least 2010.Electric car batteries, which churn out far more juice than the home variety, retain around 75 percent of their capacity when replaced — more than enough to run a good-sized house [sources: Sherman; Wald].

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But the use case with the most promise right now is less residential and more commercial: Tesla's scalable 400 kwh business/utility batteries, made up of the same basic cells Tesla Motors uses in its Model S [sources: CNN; Vance]. For utilities, the reason has to do with peak energy demand.

It turns out that utilities find the hours and days of peak energy demand almost as costly and irritating as we do. That's because, in order to keep up with the extra drawdown, energy companies must maintain special peaking power plants, aka peaker plants or peakers, that sit idle much of the time. To make matters worse, these plants, which must turn on and off quickly, burn expensive natural gas (although some run on fuel oil or hydroelectric power). Cheap, reliable batteries could allow utilities to spread the load, storing cheap off-peak energy and dispensing it during peak times [sources: Illinois EPA; Oglethorpe Power; Randall].

A few utilities, including Southern California Electric and Texas-based OnCor, are already test-driving this approach [source: Randall]. If it catches on, your house could soon run on battery power whether you buy a Powerwall or not.

Meanwhile, businesses such as Walmart, Amazon and Google are testing Tesla's batteries as a way to lower energy costs, get the most out of onsite clean energy and provide power backups for operations and data centers [sources: Randall; Vance].

In short, the prognoses for the utility and business side looks good, and that could make the consumer side look increasingly better. But must household users wait for market forces to work their magic, or can the gurus of green make a case for Tesla Powerwalls today?

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The Bottom Line for Powerwall

The Tesla Motors factory shown here sprawls across Fremont, California. Tesla plans to open another factory in Nevada that could begin production in 2017.
© Steve Proehl/Proehl Studios/Corbis

Shortly after Tesla's big announcement, critics took some of the shine off Powerwall's stylish lenticular case, arguing that the devices only made financial sense as toys for wealthy, green early adopters [source: Helman]. Even the largest U.S. rooftop installer, SolarCity, whose chairman and largest shareholder is Tesla CEO Elon Musk, opted not to initially provide Powerwalls to current customers, saying they are not yet cost-effective [sources: Geuss; Randall; Vance]. Instead, the company plans to offer the batteries to its Hawaiian customers in 2016 [sources: Geuss; Helman; Randall]. It also will allow new customers to opt into the Powerwall as part of a nine-year, $5,000 lease plan, or to buy it themselves at $7,140 — quite a jolt compared to Tesla's $3,000 price tag [sources: Galbraith; Downing and Goossens; Randall].

Why the extra cost? We can speculate that some of the extra cash will cover leasing fees and the costs of an inverter. Tesla claims its Powerwall requires no upkeep, but other details that affect the batteries' lifetime remain unclear and unproven, so some of the price might include replacement costs. Current deep-cycle batteries need swapping out roughly four times over the lifetime of solar panels. It's also possible that, given the Powerwall's 2 kW stream, SolarCity plans to equip its clients with two units each [source: Helman].

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Powerwall adopters could trim a lot of fat, and possibly make their bets pay off, by owning their own equipment or by pooling community resources but, again, this is largely speculative [sources: Helman; Gangemi].

For now, Tesla's entry into the battery market is a gamble, and a big one. On the positive side, Tesla has already forged partnerships with corporate heavy hitters, and its price point looks attractive to utilities. The greenies and the gadget junkies of the world will join in no matter what and, in terms of bang per buck, no other residential cell is fit to hold Tesla's battery box. If the cost of lithium-ion batteries continues to drop as fast as that of PV systems, then the future of Tesla's stationary batteries could look bright indeed [source: Randall].

That said, in absolute terms the Powerwall remains pricey. Moreover, the company that makes it is on track to lose $500 million in 2015, burns through money like tire rubber and sports the kind of overamped stock prices that would make a dot-com blush — all of which could add up to a sustainability company that's not very sustainable [sources: Helman].

Tesla Powerwalls will become available in late summer 2015 in the U.S., sometime that year in Europe and early in the next in the Asia-Pacific region [source: Galbraith]. After that, only time will tell whether Tesla's batteries jolt the grid or fizzle out.

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Frequently Answered Questions

Can a Tesla Powerwall run an air conditioner?
Yes, a Tesla Powerwall can run an air conditioner.

Lots More Information

Author's Note: How the Tesla Powerwall Works

The real story of Tesla Energy is arguably the gigafactory currently under construction in northern Nevada. If its production projections are to be believed, the world might actually have to struggle to produce enough lithium to keep up — at least, if it wants to keep the carbon footprint down. But if it can be done, and if they can manage not to bankrupt Reno's water supply, the benefits to battery technology could be truly transformative.

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