Does Tesla new home storage battery suggest an amazing breakthrough?

There has been lots of buzz over announcements from Tesla that they will sell a battery for home electricity storage manufactured in the “gigafactory” they are building to make electric car batteries. It is suggested that 1/3 of the capacity of the factory might go to grid storage batteries.

This is very interesting because, at present, battery grid storage is not generally economical. The problem is the cost of the batteries. While batteries can be as much as 90% efficient, they wear out the more you use and recharge them. Batteries vary a lot in how many cycles they will deliver, and this varies according to how you use the battery (ie. do you drain it all the way, or use only the middle of the range, etc.) If your battery will deliver 1,000 cycles using 60% of its range (from 20% to 80%) and costs $400/kwh, then you will get 600kwh over the lifetime of a kwh unit, or 66 cents per kwh (presuming no residual value.) That’s not an economical cost for energy anywhere, except perhaps off-grid. (You also lose a cent or two from losses in the system.) If you can get down to 9 cents/kwh, plus 1 cent for losses, you get parity with the typical grid. However, this is modified by some important caveats:

  • If you have a grid with very different prices during the day, you can charge your batteries at the night price and use them during the daytime peak. You might pay 7 cents at night and avoid 21 cent prices in the day, so a battery cost of 14 cents/kwh is break-even.
  • You get a backup power system for times when the grid is off. How valuable that is varies on who you are. For many it’s worth several hundred dollars. (But not too many as you can get a generator as backup and most people don’t.)
  • Because battery prices are dropping fast, a battery pack today will lose value quickly, even before it physically degrades. And yes, in spite of what you might imagine in terms of “who cares, as long as it’s working,” that matters.

The magic number that is not well understood about batteries is the lifetime watt-hours in the battery per dollar. Lots of analysis will tell you things about the instantaneous capacity in kwh, notably important numbers like energy density (in kwh/kg or kwh/litre) and cost (in dollars/kwh) but for grid storage, the energy density is almost entirely unimportant, the cost for single cycle capacity is much less important and the lifetime watt-hours is the one you want to know. For any battery there will be an “optimal” duty cycle which maximizes the lifetime wh. (For example, taking it down to 20% and then back up to 80% is a popular duty cycle.)

The lifetime watt hour number is:

Number of cycles before replacement * watt-hours in optimum cycle

The $/lifetime-wh is:

(Battery cost + interest on cost over lifetime - battery recycle value) / lifetime-wh

(You must also consider these numbers around the system, because in addition to a battery pack, you need chargers, inverters and grid-tie equipment, though they may last longer than a battery pack.)

I find it odd that this very important number is not widely discussed or published. One reason is that it’s not as important for electric cars and consumer electronic goods.

Electric car batteries

In electric cars, it’s difficult because you have to run the car to match the driver’s demands. Some days the driver only goes 10 miles and barely discharges before plugging in. Other days they want to run the car all the way down to almost empty. Because of this each battery will respond differently. Taxis, especially Robotaxis, can do their driving to match an optimum cycle, and this number is important for them.

A lot of factors affect your choice of electric car battery. For a car, you want everything, and in fact must just do trade-offs.

  • Cost per kwh of capacity — this is your range, and electric car buyers care a great deal about that
  • Low weight (high energy density) is essential, extra weight decreases performance and range
  • Modest size is important, you don’t want to fill your cargo space with batteries
  • Ability to use the full capacity from time to time without damaging the battery’s life much is important, or you don’t really have the range you paid for and you carry its weight for nothing.
  • High discharge is important for acceleration
  • Fast charge is important as DC fast-charging stations arise. It must be easy to make the cells take charge and not burst.
  • Ability to work in all temperatures is a must. Many batteries lose a lot of capacity in the cold.
  • Safety if hit by a truck is a factor, or even safety just sitting there.
  • Long lifetime, and lifetime-wh affect when you must replace the battery or junk the car

Weight is really important in the electric car because as you add weight, you reduce the efficiency and performance of the car. Double the battery and you don’t double the range because you added that weight, and you also make the car slower. After a while, it becomes much less useful to add range, and the heavier your battery is, the sooner that comes.

That’s why Tesla makes lithium ion battery based cars. These batteries are light, but more expensive than the heavier batteries. Today they cost around $500/kwh of capacity (all-in) but that cost is forecast to drop, perhaps to $200/kwh by 2020. That initial pack in the Tesla costs $40,000, but they will sell you a replacement for 8 years down the road for just $12,000 because, in part, they plan to pay a lot less in 8 years.

No surprise Tesla is building a factory. With their own factory, they can accelerate the price drop and reap all the benefits for themselves.

I should note I have often seen it proposed that a great use for used electric car batteries is grid storage. Why? An 85kwh battery pack that used to deliver 240 miles of range becomes much less attractive when it only goes 120 miles. It is less than half as attractive because it still weighs the same. It’s like a 42kwh pack but much worse. However, in grid storage the weight is unimportant, and all that matters is the remaining lifetime, which might still be decent — and the electric car owner will sell it to you for cheap.

What’s odd here is that Tesla is talking about making new batteries for home/grid storage.

Lion as grid storage?

Their factory is expected to be a Lithium Ion factory. But that’s not usually a good choice for grid storage. Lithium-ion is the optimal battery for weight, but weight is not a factor at all for house batteries. In fact, today, no battery is really cheap enough to be economical for home grid storage. Their plan suggests one of two things:

  1. They plan to make other types of battery in the factory, and these different batteries will be cost effective, or
  2. They expect to produce a new generation of Lithium-Ion battery that’s both cheap enough and has a high enough lifetime watt-hour number to be economical. That means one that handles many more cycles than current batteries tend to provide.

Both are very interesting. I am eager to hear what they really have. One factor I’ve heard reports of involves the “value of recycled battery” number in my formula above. The reports suggest that battery packs may still have lots of useful life in other applications once their capacity has gotten too low due to heavy use, and this can boost that residual price, and thus reduce the $/lifetime-wh.

I noted above that depreciation is a real issue. Some people think that once they install a system and pay for it, it doesn’t matter how much it depreciates. It matters in a couple of ways. First of all, if batteries in the market are getting cheaper fast, that automatically drops the residual value of your battery after it wears out. If you did your calculation presuming a 50% value, and new batteries only cost 40% of what you paid, your used batteries are going to be worth a lot less.

Secondly, as the batteries depreciate, the resale value drops. Many people sell their homes. But even if they don’t, you face the “what if I had just paid for grid power and waited to get the battery?” calculation. If the day you buy, batteries are 15 cents/lifetime-kwh and grid is 10 cents, but in 2 years the batteries are 7 cents/lifetime-kwh, your right move would have been to take the money you were going to spend on the batteries and invest it, buy grid power and then get more batteries for the same money 2 years later. Unlike computers, where you need a computer today even though you know it will cost half the price in 2 years, with power you have an option today of just using the grid and saving money, to get your more bang for your buck (total) when the price has stabilized.

On top of this, the real “price per kwh” I calculate above is not a fixed number, but a sliding cost based on the depreciation of the battery and the time value of money. Since a grid storage battery pack should last many years, the time value of money is a factor, and the early kwh probably cost more than the later ones with most depreciation curves.

But no, not for off-grid solar and wind

Many people have reacted to this announcement by declaring it to be good news for solar and other renewables. It is, but not in the way some have thought. I’ve seen writers talking about people with solar panels disconnecting from the power grid thanks to these cheap battery packs. People who live off the grid use battery packs, but at a cost that is immense compared to what on-grid people pay.

You would never want to disconnect from the grid because you have batteries and solar. You don’t control when solar panels make electricity. That depends on the weather. Most operators of off-grid battery packs try to keep them close to full, so that they can survive a period of cloudy or rainy days on what they have. But when batteries are full (or even in the upper end of their range like 80%) they can’t take much more power. When they are full, you just throw away the power, because you have nowhere to put it. It’s next to impossible to design a system that constantly keeps the batteries low enough to always store all the extra solar or wind power that comes.

When you are connected to the grid, any power you can’t use or store gets fed back to the grid to serve other people. As a result less coal is burnt at the coal plant, and everybody wins. (Except the coal mine.) If other people on the grid have batteries (but no solar panels) your extra power can go into their batteries if it’s cheap.

Cheap grid storage is great for solar and wind, but only if done in a grid. It doesn’t have to be a huge grid, but it needs to be enough that we don’t throw away the renewable power because we have no load or spare storage to put it into. Solar power happens to come during the day when demand is high, so usually you can use it right away. Wind blows randomly, but often at night, where people will buy it at a low price to store it.

Great orientation

Thanks, Brad. That was very helpful. Do you happen to know why Li-On batteries are "expensive"? What is the gating cost? Is it that there are "rare" elements, or it is complex manufacturing costs?

Costs

Today, a car’s pack is about $500/kwh. Tesla buys the cells in bulk for quite a bit less, it is rumoured, but then they have to build the pack with them, which includes wiring, cooling and physical structure.

The report is that the raw materials (refined) for Lion cost about $70/kwh. The Lithium itself is just a small part of that. Presuming that does not change much, that, plus a reasonable cost for putting them in a pack with wiring and cooling it would seem $100/kwh is a floor, but other chemistries or ore sources could change that.

That’s why for grid storage, more research has gone towards batteries that have cheap materials, but are not lightweight.

Either Elon Musk is a liar

Either Elon Musk is a liar or your $500/kwh is way off. Tesla's battery packs probably cost less than $250/kwh now, and obviously will be significantly less than that when they have their own large-scale factory.

The real cost

Reports do indeed suggest Tesla gets their batteries wholesale for around that price, but then they have to install them in their special pack with all the attendant circuitry to allow them to charge and discharge really fast, and that brings the cost closer to $400, it is estimated. The official “retail” price of Lion packs is quoted today as just under $500, and that would be the price a home-owner would pay for a home storage pack.

another possibility for why Tesla is entering this business

http://www.hindawi.com/journals/ijelc/2012/395838/ - Quantifying Cell-to-Cell Variations in Lithium Ion Batteries

These home batteries might be a way of recycling a kind of industrial waste from the main program. Not every component that Tesla produces will be within the design tolerances for the batteries that make it into the cars--especially not early in the factory's life. Brand new components that aren't up to the standard for EV batteries might still be fit for use in other use cases. Why scrap what you can re-purpose?

Nickel Iron batteries

I don't see LIon batteries as a reasonable choice for grid storage, except when their capacity in a vehicle can be used during parked hours. It really doesn't make sense to me at the cost point now, or even in the short-term future. They are fragile, expensive, and ill-suited for the potential use that they would experience.

For grid storage (or wind/solar) my favorite is still Nickel Iron (aka: Edison cells.) Some have been recorded to have 50+ year usable durations. They can take amazing abuse (overcharge, complete discharge, freezing) with little or no penalty on lifespan. They contain significant usable energy due to their ability to discharge more completely without damage. They're made of materials that aren't rare or expensive. They're entirely recyclable. The downsides are that they are slow to charge, have a poor charge efficiency, they are extremely heavy (50Wh/kg), they perform poorly when cold, discharge relatively quickly in storage, and currently only three producers make them (two in China, one in the US.) The last downside is that they're quite expensive, mostly due to what I think is a limited market allowing higher prices. Looking at stationary power requirements, though, it seems to me that the only significantly relevant downside is the cost - all of the other shortcomings are fairly easily managed or are unimportant for a grid storage system.

I'm not convinced that the Tesla model is tied to LIon batteries - it just doesn't make sense. They have too many failings for use in a grid system, and not even Elon Musk is brave enough to lose money on every deal but "make it up in volume!" So I await what the actual plan is for grid power, if any.

Grid battery

Well, while the cost per lifetime watt-hour is the primary driver of a home battery, there are some other factors:

  • Weight and volume matter little, but not zero. You have to cost effectively ship it, and you do need a room for it.
  • Cost per kwh of capacity is not nearly as important as other uses, but if it’s really high, other factors come in, like depreciation/obsolesence, and the cost of the secondary gear (inverters/chargers/wiring) is not worth it for too small a pack.
  • Slow charging is not a big problem for grid, but is for solar or wind.
  • Poor efficiency (output wh/input wh) adds to the cost of every wh you get out of it
  • Discharge while stored is mostly OK, just a minor added cost since you plan to use the power within a few days

chemical electrical storage does not make sense

There is a difference of six orders of magnitude between the energy stored or produced in
a nuclear reaction and a chemical one.

People were smarter when they used slide rules and verified exponents carefully.
I don't see this as progress but I have been wrong before.

Nuclear is really

Nuclear is really inefficent, too. Antimatter is so much better.

A few comments

Brad, you're mostly right but I have a few comments.

I believe Musk thinks he'll make so many Li-ion batteries at his new plant that he'll get the costs low enough to make them economical for home storage and rate arbitrage. He has often succeeded where others have failed, so I hope he's right again. I don't think there are any major show-stoppers as the cost of the raw materials in a Li-ion battery is currently only a small fraction of its price. In a lead-acid battery, OTOH, it dominates.

Extra weight is rarely good in a car, but it isn't quite as terrible as you imply. The power to move a car on a flat surface goes to three things: the drivetrain, rolling resistance and aerodynamic drag. Only rolling resistance increases with weight, but aerodynamic drag dominates above perhaps 40 mph, i.e., at highway speeds. This was true even in the GM EV-1, which was both exceptionally aerodynamic and pretty heavy (the first model had Pb-A batteries and a 3,000 lb curb weight).

It takes more power to drive a heavy car up a given incline, but thanks to an EV's regenerative braking you get back a fair bit of it when you drive back down.

Extra weight can actually be a good thing if it lowers an unsafely high c.g. and improves handling. EV designers always locate the batteries as low as they can for just this reason.

I've always considered the Tesla's large battery a bit extravagant since it's rarely needed for a typical day's driving, especially if fast public chargers are available when needed. But there are two other factors to consider.

First, a large battery can accept more charging power. The Nissan Leaf has a 24 kWh battery, and its high power chargers max out at 50 kW, roughly a 2C rate. But it's rare for a Leaf battery to actually absorb that much power unless it is nearly empty. (The other day I saw mine accept 41 kW at about 31% charge.) Tesla's superchargers are 120 kW max, which is actually a lower relative rate (1.4C for the 85 kWh battery) but because it gets roughly the same economy as the Leaf (3-4 miles/kWh) a Tesla can restore range more quickly than a Leaf. Yet rapid charging speed is more important for the Leaf because its smaller battery means you may have to do it more often. (Then again, it's actually rare for me to drive beyond the range of a single charge in a day.)

Second, a larger battery will be less deeply cycled on a given driving pattern than a small one, so it may last longer. But I don't know if this will offset the greater cost of the larger battery, especially since a Li-ion battery ages even when it's not being used.

Whether these factors are enough to justify the Tesla's high premium depends on the person, of course.

Extra weight

It is not just rolling resistance, because regenerative braking is really not all that efficient. It’s a good thing to do, but the reality is a lot of the energy you spend in acceleration is not recovered, and that energy depends very much on the weight.

The Tesla battery is indeed highly extravagant, but succeeds because it convinced people that a Tesla could meet almost all their driving needs, except long road trips. (They are trying to pretend it can even do that.) People reject Leaf-range cars because they meet 90% of their needs, and that is not enough. But yes, it means it lasts longer and can charge faster. But I doubt that offsets the fact that you use the upper end of that battery very few days.

Tesla’s factory will get the price of L-Ion down, but not below $100/kwh for a long time. If you aim for 1000 cycles at a 60% duty cycle, then a kwh battery delivers 600 khw in its life. If it resells for $30, and has a 90% charge efficiency, you got 540 effective kwh in its life, so you get about 13 cents / kwh to use it.

Except: That’s today’s money for storage you don’t use until the future, so interest must be added, and there are added costs for inverter/charger/grid-tie/delivery/disposal and other things.

So, there are places where you can buy night power for cheap and use it during the day where the price difference exceeds 13 cents, or even the higher all-in price. But just barely. And that’s at $100/kwh, a price that is not far above the raw materials.

This tells me Tesla must have one of the following things in mind:

  • A battery that is even cheaper to make that the raw materials cost of today’s L-Ion
  • A battery with a better duty cycle, or which can handle many more than 1,000 cycles in its lifetime, or with a much higher residual cost (same thing, really)
  • A plan to fool people into doing something uneconomical for other benefits, like standby power.

There is another factor I have not listed. If personal grid storage takes off, and industrial grid storage also takes off, then the difference in the cost of power between the night and day will shrink. In fact, there is a solid case that the grid should be able to do it more efficiently than you can in your home, and as such the price difference should drop to a level where it is not economical to do it in your home no matter what, because they have economies of scale you don’t.

Other than to get backup. But if the grid provider does grid storage, they might very will do it in a distributed fashion, which is to say their batteries would provide power during external outages further up the line, so you would only need backup for very rare local outages.

The grid also has a much bigger incentive to install its own storage (maybe still buying batteries from Tesla, who knows?) The cost of the grid is two-fold.

  1. The capital cost of all the physical plant, which is tied to the peak demand
  2. The operating/fuel cost, which is tied to total demand

For the grid, dropping peak demand is huge. That’s why they give you a rebate if you buy a more efficient air conditioner. You save them money even though you pay them less money. It’s called demand side management and is a large field.

Nothing the grid players want more than the same demand all day long. They will be happy if people help them get there in their homes, but if they can do it even more efficiently themselves, they will.

usable kWh over battery life

you say that "you will get 600kwh over the lifetime of a kwh unit"
is it right?
my understanding is that manufacturers usually guarentee 80% capacity after 1000 cycles, and for storage you do not care that much about capacity loss (whereas a car with only 20% capcity might not be usable), so assuming the battery loses 20% per 1000 cycles, total kwh over the life will be at least 2000kwh (1000*(80% + 60% + 40% + 20%) ), so way above your 600kwh;

do you agree?

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