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Tesla's Power Grab

Tesla Motors' Elon Musk is aiming for nothing less than total disruption with his Powerpack energy storage system. But should the manufacturing industry buy into the hype?

Tesla Motors Elon Musk is aiming for nothing less than total disruption with his Powerpack energy storage system. But should the manufacturing industry buy into the hype?
As far as disruptive technology goes, Elon Musk may be to Silicon Valley what Prometheus was to Mount Olympus. The mythical Titan sneaked firebelieved to be a spark of the sunfrom the gods to give early humans power over the cold and darkness. In effect, this spurred the dawn of civilization.

Musk, the larger-than-life CEO of Tesla Motors, believes his company has delivered unto the world a new way to rein in the power of the sun, and with it, a new dawn: the Powerpack, an infinitely scalable 100-kWh Lithium Ion storage battery system.

Its a technology intended for commercial and industrial applications, which when combined with a PV system, Musk foresees could power every home and business in the world.

Our goal is to fundamentally change the way the world uses energy at the extreme scale, Musk told a crowd of journalists and Tesla acolytes at the Powerpack launch in April. Were talking at the terawatt scale.

Musk began this keynote speech with the description of the small-scale Powerwall, an uber-sleek, modular 7 or 10-kWh wall-mounted unit that can store excess photovoltaic energy for when night falls or the grid fails. Because of net metering, which makes it cheaper to sell excess energy to the grid than store it, the economic appeal of this technology is still somewhat limited.

The Powerpack, however, is commercially viable now and companies wanting to slash energy costs could benefit greatly.

The cabinet-and-rack system can combine for up to 500kWh and multiple units can be connected to create a capacity for 10MWhr or more. Through pilot projects, Walmart, Amazon and Cargill already have systems in place. In production now, Tesla says the systems will churn out power at about $250/kWhabout $50-100 lower than the competition.

Theres nothing remotely at these price points, Musk told reporters. You can literally make this into a gigawatt hour class solution.

According to Tesla, the Powerpacks potential uses include maximizing consumption of on-site clean (i.e. renewable) power, skirting around peak demand charges, storing grid electricity when its cheapest, and backing up critical plant operations if there is an outage.

Smart Move

You can literally make this into a gigawatt hour class solution, Musk says of the Powerpack, which theoretically can scale infinitely.

For manufacturing and commercial operations, integrating battery storage isnt just something to decrease a companys carbon footprint. It could help the bottom line, due to peak consumption charges. Thats when electricity costs spike up during periods of high usage.

Dougherty and Associates LLC, an equity research firm, estimates that peak demand charges can constitute 30-70% of a commercial customers energy bill.

Peaker plants, running off natural gas, for example, pick up the slack and generate more juice. The squeeze is at a premium because these plants arent always in use. Think concessions at a football game.

The Powerpack changes this dynamic. The system employs smart technology and would automatically know when to draw from the battery or from the grid, which could result in some big savings.

All of the Powerwalls and Powerpacks are connected to the Internet and so were actually able to get real-time feedback, Musk said. Were able to work with the utilities to shift power around and actually manage the grid and well integrate obviously with software like SolarCitys [which Musk co-founded]. If there are other companies out there with compatible software like SolarCity well integrate with theirs too.

A week after the big reveal, Tesla reported it received 38,000 reservations for the Powerwall and 2,500 for the Powerpack. Tesla has a long way to go, considering this is only enough to power one-quarter of Boulder, Colo., which requires 1 GWh, or 10,000 units.

Beefing Up Battery Storage

Very bullish on sustainable beef production, Cargills processing plant in Fresno agreed to take part in Teslas pilot project to test the Powerpack technology. In 2013, the plant partnered with TEVA Energy to install rooftop solar panels that heat the water used for food safety and sanitation. It also has an anaerobic digester to capture methane to account for 30% of its natural gas requirements.

Tesla placed 1MWh of battery storage, comprising five outdoor cabinets, on site. To bypass peak consumption prices, those storage batteries are charged directly from Pacific Gas & Electric during off-peak hours. When prices are high, the plant accesses the battery; when prices are low, it draws from the grid.

This method alone, Cargill estimates, will save the company about $100,000.

We are not looking at this from a marketing advantage standpoint, says John Nash, the plants general manager, via email. We are looking at this from the standpoint of how we will continue to reduce our energy footprint at Fresno.

Still, $100,000 could mean a couple salaries, or new equipment to increase efficiency. And Nash says the Tesla batteries require very little time and few resources to operate and maintain.

So would Nash recommend embracing solar?

Anyone considering solar energy needs to do the appropriate due diligence to determine if it makes business/economic sense, as well as achieving the organizations sustainability goals, he says.

Is the Powerpack Right for You?


The Powerpack system supplied the energy for its own product launch at Tesla Design Studio, and CEO Elon Musk hopes someday it will power the world.

There are several factors to investigate before diving head first into this bowl of electric Kool-Aid.

Brett Simon, energy storage analyst for Greentech Media, says chiefly among those are your market, time-of-use pricing, high peak demand prices, and if you have a spiking load profile.

If this sounds like your plant, Simon says, then almost without a doubt the economics make sense in the present.

In a solar-friendly state like California, he argues, it makes a lot of sense to look into battery storage. This is largely due to the golden states Self Generation Incentive Program. SGIP incentivizes advanced energy storage systems, along with several other renewable technologies, by up to 60% of a projects cost. SGIP gives a $1.46/W rebate.

While its not always sunny in Boston, Massachusetts is another state (commonwealth) where renewable energy policies would make battery storage appealing. CleanEdge, a research and advisory firm focused on clean tech, named it second behind California in renewable leaders. In May, it launched a $10 million initiative to establish and support the energy storage market.

At the moment not every market has a case, Simon warns.

Florida is the best, or worst example. Despite being called the Sunshine State, Florida actually taxes commercial properties with solar arrays, according to the AP.

Were trying to provide Floridians with solar power, said Scott McIntyre of Tampa-based Solar Energy Management. But there are no incentives for commercial solar in Florida. None.

The federal government has a program that should help manufacturers take advantage of a solar plus storage solution. Called the Solar Investment Tax Credit, it offers a 30% credit for residential and commercial properties. The company that places the system gets the credit. Set to drop to 10% at the end of 2016, the ICT has assisted in growing solar installation rate grow by 1600% since 2006. TheSolar Energy Industries Association predicts a 57% decline in 2017 without congressional action.

Having a more certain policy framework is something that will definitely help push storage forward, Simon says. And more and more states are starting to get interested in deploying energy storage on both sides of the meter.

With policies becoming much more beneficial, net metering being phased out and the ICT expected to drop, there is no better time than the present to look at solar and storage options.

If were looking five years out, it will become something that will make a lot of sense for a lot of C&I customers to pursue, Simon says. With the declining cost trends, it often will make sense to pursue solar plus storage.

When exploring options, should the Powerpack be at the top of your list?

The announcement did generate quite a bit of buzz, Simon says. Energy storage hasnt been in the public consciousness very much. Its still a fairly niche and emerging market. So the announcement that Elon Musk got people talking about it if nothing else, and got the industry to be brought more into the mainstream.

That, he says, is causing competitors to lower their prices, as one might expect in any market. Theres one thing to consider before reserving your Powerpack.

The price point they advertised is lower than present price points, but at the same time, you have to consider it actually accords fairly closely with what a lot of other industry players are saying their systems will reach within the next year or so. Teslas product has yet to be demonstrated at large scale. I cant really say whether its a clear winner.

As Nash said, due diligence will be the key.

Conclusion


The Powerpack Storage System is designed to:

  • Maximize consumption of on-site clean power.
  • Avoid peak demand charges.
  • Buy electricity when its cheapest.
  • Get paid by utility or intermediate service providers for participating in grid services.
  • Back up critical business operations in the event of a power outage.

Source: Tesla


If this was a car race, Tesla would probably have pole position right now.

Simon notes that articles about the market often have headlines such as Look Out Tesla, Company X is Coming for You. (Yipes! and Achtung, Tesla! were actual headlines.)

Tesla might not be a sure thing, but its certainly close. And when the Nevada Gigafactory starts production of Teslas batteries next year, the demand for Powerpack could reach ludicrous mode.

In her recommendation to buy Tesla stocks, Andrea James writes, After speaking with a dozen experts and companies in this space, as well as conducting a nationwide survey of 30 solar panel installers, we believe that Teslas entry into the grid storage market disrupts it.

She also asserts: Tesla has evaluated every conceivable concept in chemical storage. While competitors have other technologies that may show promising numbers in labs, such as higher cycle lives, the question remains as to whether they can be commercialized properly.

Her model forecasts that Tesla Energy will sell 75,000 Powerpacks by 2020.

Thats good if your 401K is tied to Tesla, but doesnt do much for your energy bill.

You may even feel Musk is more modern day Icarus than Prometheus. After all, he does want to soar to the heavens, or Mars, and in June his SpaceX Falcon 9 rocket did crash into the sea.

Yet there is still reason for optimism.

Icarus received his wings from his father; Musk is a self-made billionaire. By age 30, the co-founder of Paypal sold to eBay for $1.5 billion. While his company has been down, hes never out. The bailout Tesla received from the U.S. government was repaid nine year early. And though there are dozens of competitors in the storage field, Tesla has the means to be produce more for less.

Theres no reason to think the Powerpack wont perform admirably.

And our conclusion is that while there could be a better battery storage solution out there, the Tesla Powerpack, or at least what it promises to be, will be the market bellwether.

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