Tesla battery storage will accelerate exit of coal generators | RenewEconomy

Tesla battery storage will accelerate exit of coal generators

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In one fell swoop, Tesla Energy has cut the price of battery storage by more than half. This makes solar and storage readily affordable in Australian homes, and has huge implications for pricing of networks. But it will also accelerate the exit of coal fired generation.

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Elon Musk has created one of the world’s most valuable motor companies by doubling the price of electric vehicles and wowing consumers with a high-performance, luxury electric vehicle.

Now he wants to use that cachet to enter the mass market – in home energy systems with solar and storage. While the impact of the Tesla Model S on the global motor industry was considered to be something of a slow burn, the impact of Tesla Energy’s battery storage system, the PowerWall. is likely to be dramatic.

It changes everything. In one fell swoop, Tesla has cut the cost of stationary battery storage by more than half, delivering disruption to the doorsteps of incumbent utilities and fossil fuel generators that most did not imagine would emerge for at least another decade.

Deutsche Bank says the Tesla lithium-ion battery pricing ($US3,500 for a 10kWh system) translates – after inverter costs and installation – to a price of $US500/kWh, less than half the industry wide costs of $US1,000-$US1,250/kWh. (See full pricing here and our other stories: Did Tesla just kill nuclear power, and Tesla just put a bomb under business model of the grid.)

What it means for the consumer – and conventional energy providers – is that the combination of rooftop solar and lithium ion battery storage is now cheaper than the grid – particularly in places with high electricity costs and good sun, and that means countries like Australia.

neometals march

According to Deutche Bank, the Tesla pricing translates into delivered energy at a cost of US6-8c/kWh to a solar system. That means the combined cost of a solar array with battery storage is now in the high teens or low 20s c/kwh.

“This implies that solar + batteries are already competitive in high priced areas like Hawaii,” Deutsche Bank said, adding that further cost reductions can be expected in coming years as production shifts to the new “gigafactory” in Nevada.

It’s a moot point about how quickly this will take off in the US, where the rate of rooftop solar is growing, but still relatively low penetration.

But it has huge implications for Australia, which because of its high retail electricity costs (around 30c/kWh and higher in time of use areas), excellent solar resource, and huge penetration of rooftop solar (one in four houses in some states) finds itself at the cutting edge of this revolution.

In late 2013, the CSIRO predicted that battery storage could be economic in the mass market around 2040. Last year, AGL suggested it might be 2030. UBS suggested going completely off grid might be economic in 2018. Now, it seems, battery storage, is likely to be competitive for the average household in 2016, when the first Tesla battery systems are delivered in Australia.

Little wonder then, that AGL – which last month said it would phase out coal fired generation by 2050 – on Friday announced it would fast track its battery storage offering to consumers. Utilities are now realising that they need to act quickly to stay relevant in rapidly changing markets.

tesla powerwall twoAnalysts say that even with the foreign exchange and shipping costs, and the inverter and installation costs, the Tesla technology is a step change for Australia. The addition of battery storage to solar arrays in Australia could significantly reduce consumption from the grid, and offer relatively quick pay back times.

This has huge implications for retailers, generators and network operators. Accelerating the entry of battery storage at one end of the business surely means accelerating the exit of coal fired generation at the other end.

One analyst, crunching some numbers for RenewEconomy, says adding battery storage to a solar array could mean that the amount could be reduced to less than 2kWh a day – from an average of around 12kWh for non solar houses. Payback times are less than 10 years.

The addition of battery storage is likely to be very attractive to solar households paid little for exports (and particularly nearly 150,000 solar households in NSW that will lose premium tariffs next year), and those who want to avoid blackouts (nearly 200,000 homes lost power in the storms last month, many for more than a week).

The Tesla battery storage array is unlikely to shift homes off-grid, but it could give them a large degree of independence, and the ability to operate basic appliances when the power does go.

The warning from Deutsche Bank was clear: “Utilities that attempt to aggressively counter DG (distributed generation) rooftop solar could be priced out of the market,” its analysts warned.

That’s because these cost reductions are only the beginning. When production begins at Tesla’s Gigafactory in Nevada, being built with Panasonic, battery storage costs are likely to fall by half again.

Steve Blume, the head of the Australian Energy Storage Council, says if Tesla can deliver on these prices, it will be a massively disruptive initiative.

Blume says it will force other battery suppliers to compete at around the same price, and will force the rapid change at network level that has not been apparent to date.

“(It will) put a bomb under the need to transform our unidirectional dumb grids into multi-directional multi-generation type smart grids ASAP,” Blume writes.

There has been huge frustration in the industry about the slow pace of policy change. The recent network price ruling for NSW and Queensland – which sets the revenue levels out to 2019 – virtually ignored solar and storage, yet there is no technology that will have as big an impact.

The incremental savings being offered by reduced spending on poles and wires simply won’t match the savings being offered by new delivery systems, and the ability of households and businesses to generate their own energy, store it, and even share it with neighbours and others.

“The existing network players will simply be unable to manage the commodification of solar and storage at this level,” Blume writes.

“The customer demand will fly far ahead of the cumbersome and glacial pace of change that we have seen so far. That is so in the US and more so in Australia.”

The biggest impact, however, may be on the coal fired generators. Pushing out fossil fuel generators, coal in particular – is Musk’s stated intention (along with making money).

He says he wants to change not just the transport market, but the whole energy system. “It is something we can do,” Musk said at the announcement. “And that is the future we need to have.”

Some utilities already recognise this. The biggest in Europe and the US are either jettisoning their centralised fossil fuel generators, or at least recognising their age of dominance is coming to an end, and focusing their efforts on solar, storage, electric vehicles and micro-grids.

Their future depends on their ability to compete with the likes of Tesla and its sister company Solar City, or forge partnerships with them. The likes of AGL Energy and others in Australia may need to follow. Indeed, there is some talk in Australia that this is in train.

Others say Tesla will not have it it’s own way. They point to newer battery technologies are currently being released such as LG’s lithium-ion Polymer batteries with higher cycle life and depth of discharge rates at similar price points. Others point to Austalia’s Redflow, which is delivering household models of its zinc bromide battery that some say is more suitable to household consumption patters. There are numerous other emerging competitors.

But the main point is that battery storage is coming down quickly. “One thing is certain, the world of home energy storage is upon us and affordable!” said one.

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  1. Finn Peacock 5 years ago

    For an installed price of $US5000 someone would have to provide a ‘sunny island’ style battery inverter and full installation for $US1500. That is a huge call! I’d estimate the cost of that at $US4500 at least.

    • RobS 5 years ago

      Island inverters are low volume products, I expect the price to come down once there is more competition and greater volumes but I think 6-7k is more realistic in the short term, still a huge advance on current offering which are around $30-35,000 for equal or less capacity.

      • Steve Young 5 years ago

        Solarcity has an all in figure of $US7,140 for an installed 7kWh system. This is around $A9,100 at the current exchange rate (assuming GST is already included). Using ATA assumptions around discharge and cycles (70%, 5000 cycles) (http://www.ata.org.au/wp-content/projects/Unplug_final.pdf) that gives you a LCOE of 37 cents/kWh. You still need to buy energy. The cheapest of which is foregone FiTs at around 6 cents/kWh. This gives you a total cost of 43 cents/kWh

  2. Jouni Valkonen 5 years ago

    It is good to remember that if it is almost affordable for individual households to go off-grid, Tesla’s and SolarCity’s microgrid services for local neighborhoods cost only half of that. Mere 250 dollars per kWh and less need to over engineer supply side and other scale benefits in integration of inverters and solar panels and possibly windmills for larger microgrids and factories.

  3. George Michaelson 5 years ago

    As I understand it, its currently not legal in Qld (at least) to receive the REC/RET and to have storage associated with your PV.

    I can also believe that the ToU tarrif is going to be driven off a cliff to compensate for this, way in excess of the neccessary re-engineering of the local distribution net to cope with DC storage sources in the home.

    I’m not saying I “like” this belief, but surely we can expect monolithic central generation to ‘fight back’ with adjustments to their model in a (vain?) effort to keep revenue flows broadly the same irrespective of how much power we consume?

    ie.. this is going to requre regulatory adjustment: we’re going to need a strong regulator, willing to step in and direct the industry to take it, and not try to pass it on.

    • Mike Dill 5 years ago

      In my opinion, Killing the Time-Of-Use evening peak and usage peaks (demand charges) with storage, will cause the dinosaur utilities to double-down on the base charge. If they are not careful, that will only accelerate the adoption of local power generation and storage, and cause more people to decide that they can live without the wires.

      • RobS 5 years ago

        It’s becoming increasingly obvious they are well aware of this, just look at AGLs announcements in the last fortnight, the first one planning to phase out all coal generation over the next 40 years and the second one announcing an intent to offer home storage systems in the near future

        • eddierothmanisatool 5 years ago

          they are playing me too. the agl announcement has no price or specs. not even a supplier. they know not what they wish for. they are dead already.

      • Sean broadfoot 5 years ago

        I think that the whole industry is already in a death spiral. http://www.smh.com.au/national/the-death-spiral-scaring-electricity-providers-20140706-zsy76.html

        The electricity companies will do some looting on the way out for sure.

        • eddierothmanisatool 5 years ago

          totally agree sean. but they will only loot the taxpayer purse. im with you. they are doomed. and not a moment too soon.

    • RobS 5 years ago

      Whilst the number of voters who are interested in adding storage can be counted on two hands laws like that will remain on the books, when 50+% of the population realise they can get their power cheaper by going off grid or by storing their excess solar generation for later consumption within the home then that law will be dumped faster than you can blink.

      • Coley 5 years ago

        Now, I tend to be influenced by what I read on here, but how aware is the ‘average Australian’ of the developments in this area?
        In the UK the awareness of RE and EVs ( due to the denialsts and doomsayers access to the media) is abysmal!

        • RobS 5 years ago

          Abysmally, but watch that change in a big hurry when the tabloids start running ads offering off grid set ups for “zero dollars down on 10 year finance for less than your quarterly power bills”

      • eddierothmanisatool 5 years ago

        completely disagree. i work in the industry since the powerwall announcement every customer we spoke to about storage has told me, i dont care about the cost, i want to go off grid. really interesting. its the iphone of batteries we offer more compelling products at better price but the csutomer wants sexy

        • RobS 5 years ago

          Well only time will tell, my guess would be that yes there is likely a group of “fanboys/girls” who will buy this regardless of the economics for the sexy or Eco cred and certainly this packaging is likely to be far more appealing to many people than previous generations of lead acid systems for going off grid which required significantly more hands on babying of the system and battery maintenance. LiIon tolerates more cycling, greater depths of discharge and requires no hands on physical maintenance from the owner. However I don think it will be a massively deep pool who would buy regardless of the economics and the real takeoff in demand will occur once the combination of compelling technology AND compelling economics is established. We saw the same thing with rooftop solar, in the 90’s and early 2000’s when the economics were less than compelling there were still a hardcore few who installed solar for ideological reasons however once grid parity hit the take up rate has exploded.

      • eddierothmanisatool 5 years ago

        additionaly this is always teh way. the law always lags tech

      • lucy 5 years ago

        ….OR they’ll start taxing sunlight.
        I’m old enough to remember some arm of the tax-office driving around looking for TV aerials on addresses which hadn’t paid the licence-fee to watch TV. Later people would hide the aerials inside the ceiling-space, so hi-tech vans with scanners would drive around picking up signals going to unlicensed premises.

    • WR 5 years ago

      You might want to check your information. Installing batteries will revoke your access to the original 44 c/kWh government feed-in-tariff bonus, but I find it difficult to believe it is illegal for RET systems.

      • George Michaelson 5 years ago

        You’re right. Illegal was the wrong word. Its a material change of use which will cancel the RET at the higher scale. Although, I was told that historically, battery control systems weren’t rated for attachment to feed-in systems, so there was a block to ensure they stayed in off-net use only. Now? I am less sure there is an issue. (and see above about AS4777)

    • frostyoz 5 years ago

      You can claim the S-RET on a PV installation of 100kw or under, whether or not you have storage associated with it.
      Your installation must be AS4777 compliant, which previously did not accommodate multi-mode inverters used with storage, but now does.

  4. Jacob 5 years ago

    U$5000 for a 9-year lease of this including inverter, control system, and installation. From SolarCity.


    • adam 5 years ago

      good link.

      Also says outright purchase of system is $7140 USD.

      • Finn Peacock 5 years ago

        $US7140 = $AU9118 Add GST and you have got $10k

        7kWh will cost at least $10k installed in Australia.

        • WR 5 years ago

          Quoting the US price for the entire package and applying the exchange rate isn’t applicable here. I doubt that we would be importing the inverters and controllers from the US and we certainly wouldn’t be importing the installers and service agreements.
          The only thing from that package likely to be imported from the US is the Powerwall. Its US price is $3500. Applying the exchange rate and adding GST gives an Australian price of about $4900 for the 10 kWh Powerwall and about $4200 for the 7 kWh battery.

          • Finn Peacock 5 years ago

            yep – and add the cost of a battery-inverter with islanding/UPS control features, installation, gross margin and GST and there is no way you can install a power wall with backup features for less than $10k AUD

  5. Mike Dill 5 years ago

    Giles, Thank you for the article. At the end you noted that newer battery technologies and chemistries will likely pass Li-ion as the storage battery of the future. I completely agree with you on that item.
    Tesla has also noted that the chemistry will change, but has noted for the next few years Li-ion will remain the leader (in kw/$). JB Straubel, the VP of batteries, noted that they had to start with something.
    JB has also stated that they will continue to change the chemistry as new technologies are validated. Given the size of the gigafactory, I fully expect that they will have at least one pilot line running prototypes of possible new battery formulations, which will be moved into their main-line production as they are proved.

    • Coley 5 years ago

      Thanks for that, I was a bit worried that Tesla was putting all it’s eggs into one basket.

  6. frostyoz 5 years ago

    Assume cost of a 10kwh battery system with multi-mode inverter and controller (excluding PV panels) is USD7,140. Or A$10,000. If you can get a 10 year life, and finance it at 5%pa, your monthly cost is A$106. Or A$3.50 per day, excluding panel costs.

    If you can charge up 10kwh with surplus from your panels each day, and fully discharge into peak consumption each evening, you need to avoid 35c/kwh each day to recover your $3.50 per day cost.

    If you can only get an 8 year life from the battery, your daily cost is A$4.16. And if your discharge rate is only 80% of the battery capacity, your avoided cost needs to be 52c/kwh to break even.

    If you went fully off-grid, you would also save about 90c per day grid network charges.

    At my place, peak ends at 8:00pm and drops back to about 24c/kwh shoulder rate, so you don’t have long to discharge that battery.

    • WR 5 years ago

      Apparently the 10kWh system has not been designed for a daily charge/discharge scenario. You would be looking for the 7 kWh system for that. Who knows what the differences are between the two systems that makes the 10 kWh unsuitable for peak-shaving?

      Why would you pay $7140 with 5% financing for a 10-year system when you can get a 9-year lease for $5000?

      • frostyoz 5 years ago

        Even at US$5,000 for 10kwh, with 80% efficiency and assuming you could peak-shave, your breakeven is A29.8c/kwh (ex-GST). Current peak-shoulder-offpeak rates in Sydney (shoulder after 8pm) are 46c-18c-10c (ex-GST). That’s with one of those evil smart meters.

        And that’s assuming you have already bought your panels.

        So, it’s not yet world-changing. Close, but not yet. Let’s see the prices when they land in Oz.

        • Richard 5 years ago

          Your talking about a system and technology that is just hitting the shelves. Wait 5 years and then lets see.
          By then the costs will be falling dramatically no doubt. But then governments will be looking to tax your output. So who knows.

  7. Rob 5 years ago

    I live in Newcastle, NSW. We have a “Time of Use” meter and we currently end up paying, on average, a minimum of 22 cents/kWh, for our energy, to AGL. If you include the supply charge and GST, which we also have to pay with each bill, then it works out at a minimum of 38 cents/kWh. If your figures are correct and that it may indeed be possible for a combined solar array with battery storage to deliver energy at a cost of 19 cents/kWh ( “in the high teens” ) thats half what energy now costs me! I would have to go off grid though to achieve that as that is the only way to eliminate the supply charge and GST. Or, I can remain on the grid, install a solar array and battery storage, and it won’t cost me any more than what I am paying now. What are we waiting for?

    • frostyoz 5 years ago

      See my note below. The 10kwh battery system costs you the equivalent of A29.8c/kwh before GST, assuming you can charge them in the day and discharge at night with 80% cycling.

      But you also need to buy your panels – these system costs quoted above are for batteries, controller and inverter only, and don’t include the panel cost.

      You also need to pay GST if you purchase or lease the system, so there’s no additional saving there.

      And if you’re going to go off-grid and save the 80c per day supply charge, you better have plenty of batteries for those rainy days / weeks.

      • Doug Cutler 5 years ago

        Perhaps you have a moment to suffer an interested amateur. I’m honestly not trying to be contentious, just trying to get a fix on what you’re saying.

        From the article above: “According to Deutche Bank, the Tesla pricing translates into delivered energy at a cost of US6-8c/kWh to a solar system. That means the combined cost of a solar array with battery storage is now in the high teens or low 20s c/kwh.”

        Immediately above you cite a figure of nearly 30c/kWh BEFORE panels whereas the lower Deutsche Bbank figure is clearly for storage/solar combined. I don’t understand where the discrepancy lies. I can see where someone on the ground in Oz might have a different insight than a German Banker but are they really that far off? Am I missing something or is it an apples and oranges thing?


        • Doug Cutler 5 years ago

          Apparently, Tesla has a bi-directional inverter that works for both the solar and battery in a combined system. Perhaps this accounts for some of the cost estimate differentials.

          • Doug Cutler 5 years ago

            OK, a more recent RenewEconomy post is shedding some light causing me to regard the Deutsche Bank analysis of 20c/kWh with solar/battery combined as the more accurate:



            “Musk also said there had been a lot of confusion about the pricing of the battery storage offering from Tesla. Some have suggested that the retail price will be effectively double, because the Powerwall will need the same money spent again on suitable inverters.

            Musk says that is not right. The Powerwall includes a DC to DC inverter, and that can interface directly with a solar panel installation.

            “And if somebody has a solar panel installation, they already will have a DC to AC inverter for the solar panel system, and so no incremental DC to AC inverter is needed,” Musk said.

            “In some of the analysis we’ve seen online by people who think are experts, they don’t seem to realize that there is a DC/DC inverter. If you already have a solar installation or you’re going to get one, the DC/AC inverter is already there. That’s an important point in considering the cost of the system.”

        • Fred Grow 5 years ago

          Read Clean Technica article

          “Let’s Get Straight: Tesla Powerwall DOES = $3,000”
          May 13th, 2015 by Zachary Shahan
          The assumption places a higher price than the unit will tetail for in OZ

      • Tim 5 years ago

        To avoid the cost of extra batteries that you only need a few days per year, you could install a small diesel generator to top up your batteries. Not as clean and green, but would give you peace of mind.

        • eddierothmanisatool 5 years ago

          spot on tim and size a good inverter/charger for more panels and batteries as the costs fall.

        • lucy 5 years ago

          On the right track, but think it through. Diesels need to be run for long periods under a fair load if you don’t want to kill ’em young.
          A cheap demand-start petrol genny (Bunnings had ’em for $259 recently) will not only be ample for a quick battery-charge, but also run your heavy short-term users like microwaves, vacuum-cleaners and the like: thus greatly reducing the size of expensive battery banks which WILL have to be replaced. The gennies mentioned above are certainly el-cheapos; but give five minutes use a couple of times per day should outlast you….And if they DO need to be replaced AFTER the 2-year warranty runs out the price is negligible.
          All the best.

      • lucy 5 years ago

        Shop around. These days you can buy a useful (7 or 8 kw) stand-alone system from scratch for about $6000 ~ and put it together yourself on KISS principles. DIY not only saves a bundle, but allows you fix it if something goes wrong, instead of being dependent on very expensive fix-it men or warranty-conditions.

  8. Rob 5 years ago

    Thanks for this article Giles. History in the making! I really enjoyed the video. This should be front page news but it won’t even get a mention in the mainstream media or by our politicians. How can we have such stupid people in charge.

    • nakedChimp 5 years ago

      Tesla home battery was in Cairns News and titled somewhat along the lines of – ‘never pay for electricity again’ .. didn’t read it though

      • lucy 5 years ago

        To quote that other notorious whore:- “Well, they WOULD say that, wouldn’t they?”

  9. wormseye 5 years ago

    Nobody cares. It is theoretically possible to distill water on your garage and go off the water mains but no one does. Cooks could use electric stoves but they prefer gas. Electricity consumers are interested in convenience and will stay with mains power – the monthly cost is a fraction of household overheads.

    • Daniel Walmsley 5 years ago

      The cost of power is a rather large percentage of the household overheads.

    • Sean broadfoot 5 years ago

      My last electricity bill for a quarter was $1700. I can pay off an $11000 loan over 3 years and pay the same I am paying now.

  10. Steerpike13 5 years ago

    I’m curious, what does this mean for NSW’s poles and wires sell-off. Anything at all?

    • john 5 years ago

      It means as every one knows that the asset has to be written down to a realistic value.
      The reason all state governments have been trying to sell their transmission systems is because of the capital risk they have.

  11. phred01 5 years ago

    Larry Oaks is predicting an early election as rabbits way out of the mess he created

  12. Roger Brown 5 years ago

    “Stored Sun light” I like that , cannot see Abbott using that 3 word slogan . Coming to Australia in 2016 -17 suits me . Thought about buying shares in Tesla years ago ($4.20 a share ) last time i looked they were over $250 . I like the 7 seater car and price .

    • eddierothmanisatool 5 years ago

      tesla have never been 4.20. they listed at 17.

  13. Andrew 5 years ago


  14. Pedro 5 years ago

    Exciting news from Tesla. Almost sounds too good to be true. Be very interested to find out the full installed costs when the 1st few systems go in.

  15. Phil Gorman 5 years ago

    Good news – an increasingly rare pleasure. Thank you Giles. Many wrists may yet remain unslit.

  16. Richard 5 years ago

    When this ramps up, which no doubt it will, like a bullet out of a gun. Expect the installed cost to come down very quickly. I can see group buying schemes like the one we joined when we installed our 1kw system under the 66c feed in.
    Maybe a renewable friendly government may see fit to subsidize the costs of the battery packs to low income earners. There are so many possibilities.

    Anyway you look at it, the death spiral is about to go into overdrive. Coal is
    effed and much quicker than anyone would have thought.

  17. waypasthadenough2 5 years ago

    Does anyone know if this will really work? Will the average consumer be
    able to afford it? If enough who can afford it buy it will it make grid
    power too expensive for the rest of us? Is there a time-scale for a
    switchover? Who will decide that? I think the govt. has true ‘free
    energy’ systems they’ve acquired from ‘other‘ sources. Allegedly J.P. Morgan stopped Tesla because he didn’t want to sell antennas. What will be the catch for this? There’s always a catch…

    I don’t know about Australia but 45 percent or so of the U.S. pop. is on food stamps or some sort of govt. support.

    Yes, I’m cynical. I’ve been paying attention for too long.

    Don’t understand my bad attitude? Start here: http://www.freekentucky.com/the-must-readwatch-page/

    • eddierothmanisatool 5 years ago

      crack out the tin foil hats. mass grid defection is inevitable.

  18. Lawrence Coleman 5 years ago

    Might seem like a rather high upfront price now but as production starts ramping up and with other companies globally contributing the cost per unit should tumble. It’s always been my goal to become totally electrically sustainable and now this goal seem a hell of a lot closer. I also want to see to it that Tony Abbott’s galilee basin project does not come to reality. The faster this technology is rolled out the better..for all of us!

  19. lucy 5 years ago

    Anybody who buys a (expensive!) battery bank which must remain connected to the grid needs their head read; they’re getting the worst of both worlds!
    Besides which they not only lose the independence of a stand-alone system, they spend a lot of money putting themselves even more at the mercy of the power industry by pricing themselves out of the option of disconnecting from the grid ~ eg when the ‘Service to Property’ charge costs more than the power they use from all sources……and is STILL rising.
    How easy it is to suck fools into switching their other stand-alone resource (their brains!) off.

  20. lucy 5 years ago

    hohohoho! Even at today’s prices you can buy 10kw of battery-storage for UNDER $2000 worth of batteries available anywhere. (How long they last will depend on how they’re used and DOD.

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