Powerwall payback

We crunch the numbers on the new Tesla Powerwall to see how it stacks up in terms of offsetting your electricity costs.

A power play

Tesla's Powerwall has reached Australian shores, with the first installations of the highly anticipated battery storage unit already underway.

The Powerwall, a home battery system designed to store electricity generated from rooftop solar panels, has attracted a cult-like following in recent months after the announcement that Australia would be one of the first countries to have access to it.

While the concept of a home battery storage system isn't exactly new – they've been available for some time – Powerwall is considered by many to be a game-changer for the electricity industry. With a sleek contemporary design and a price that's perceived to be more affordable than its competitors, it's widely believed the Powerwall will pave the way for battery storage systems to become a common household feature.

How does it work?

The Powerwall is a wall-mounted, 7kWh lithium-ion battery storage system that comes with a 10 year warranty. The battery has a daily cycle, meaning it's designed to charge and discharge each day. The efficiency of the battery is 92%, so although it has a 7kWh capacity, the Powerwall's working capacity is more like 6.4kWh. Tesla also has a 10kWh weekly cycle version intended for back-up applications, but it's the 7kWh version you'll see in most home installations.

We've taken a look at the first real-world case study of a Tesla Powerwall. The yearly electricity bill dropped by more than 90%, but can every owner expect such a saving?

The Powerwall can be used to store electricity generated by rooftop solar panels (also called photovoltaic or PV panels) during the day so that the electricity can be used at night. This is an exciting prospect for people who already have solar panels, as it enables them to use their own power rather than exporting it to the grid.

However, existing solar owners wishing to retrofit a Powerwall unit should be aware they may need to fork out for a new inverter. We were told by Natural Solar, one of the providers of the Powerwall in Australia, that there are only two inverters currently on the market that are compatible with the Powerwall. Both of these inverters were only recently released, so most solar owners won't have one. You'll also need a solar array large enough to both power your home and charge the Powerwall; for most homes that would mean at least a 4kW array.

If you don't already have solar panels, the Powerwall can be purchased as part of a complete system that includes solar panels and an inverter.

How much does it cost?

Natural Solar is selling a 4kW solar panel system and Powerwall with a Fronius hybrid inverter for $13,990 GST inclusive and fully installed. The same system with a SolarEdge inverter costs $14,990. Prices already take into account rebates for small-scale technology certificates (STCs).

If you already have solar panels, the Powerwall and a compatible inverter will cost you between $12,000 and $12,500 depending on which inverter you choose.

Origin is another provider of the Powerwall, but they are currently only selling the unit as part of a complete package with solar panels. Origin is selling a 4kWh solar panel system with a SolarEdge inverter and Powerwall for $16,500 GST inclusive, fully installed and with STC rebates taken into account.

Is the Powerwall big enough to take my house off the grid?

It depends on your energy needs and the number of people living in your household, but a 7kWh battery is not going to be enough to make most households independent of the electricity grid. But it is possible to install two or more battery units to increase your storage capacity.

What is the payback time?

If you are thinking of purchasing a Powerwall, it's worth calculating how the cost of the unit compares with the saving you will make on your electricity bills. There are many factors that need to be taken into account, but you can get a rough estimate of your payback time by knowing what you currently pay for electricity and, if you already have solar panels, how much of your solar energy you use and how much you export to the grid.

It's also worthwhile checking if there are any state or even local government rebates available for purchasing solar panels or a battery storage system. For example, Adelaide City Council currently provides rebates of up to $5,000 for installing solar panels or a battery storage system.

Crunching the numbers

As a rough estimate of the payback time for a typical household, we looked at the energy usage of Andrew, who has signed up for an installation of a solar array combined with a Powerwall with Origin. Andrew has a freestanding house in Sydney, where he lives with his wife and two children, aged eight and 10. Andrew and his wife both work from home part-time, which makes their energy use higher than most households, but it also gives them more potential to tap into their own solar energy rather than feeding it to the grid.

If Andrew was to install a 4kW solar array on his roof, he could expect to generate around 15.6 kWh of electricity per day, on average. About 7.5 kWh of this would be required to charge the Powerwall due to inefficiencies with the battery and inverter, which could then be used to offset 6.4 kWh of his energy use during the night. This would save him $1.40 per day (6.4 kWh x 21.81 c/kWh).

If we assume Andrew didn't use the remaining 8.1kWh of solar energy after charging the Powerwall and fed it back into the grid, this would earn him $0.49 per day with a feed-in tariff of 6 c/kWh. Together with the savings from using the Powerwall to store electricity for later use, this will give a total saving of around $687 per year.

With Origin's total system cost of $16,500, Andrew has a payback time of just over 24 years, or 2.4 times the warranty period.

But since Andrew and his wife work from home part-time, this allows them to make the most of their solar panels. If we assume Andrew could use half of his solar electricity remaining after charging his Powerwall every day, then he would lose $0.24 per day in feed-in tariffs but would save an additional $0.88 per day in electricity costs (4.05 kWh x 21.81 c/kWh). This would save him $2.52 per day or close to $921 per year. This equals a payback time of 18 years.

Obviously, the more solar energy Andrew can use to power his house, the better the payback time will be through lower electricity bills. As a best-case scenario, let's assume Andrew managed to tap into all of his solar power by increasing his daytime energy use and charging his Powerwall; Andrew would be saving $3.40 per day (14.5kWh x 21.81 c/kWh), giving an annual saving of $1,154 or a payback time of just over 14 years. 

What if I already have solar panels?

The payback time would be less if you already own a solar panel system that has already paid for itself in reduced energy costs. In the case of Andrew, we estimate the $1.88 he would save per day by charging his Powerwall and sending the rest of his solar energy to the grid would give a payback time of close to 17 years, based on Natural Solar's price of $12,000 for the Powerwall and a compatible inverter. If he used half of his solar power he could expect a payback time of around 13 years. Only if he used all of his solar power could he expect a payback time that falls close to the Powerwall's warranty period, coming in at around 10.4 years.

Payback times will be different for every household, but in some instances it seems the payback time may well exceed the warranty period for the Powerwall. If your intention is to have the Powerwall paid off by your electricity savings, then you might want to chase a further guarantee from your installer that the unit will last that long.

What's also clear is that tapping into your own solar power as much as possible, rather than feeding it back into the grid with a measly feed-in tariff, will decrease your payback time.

These are just simple calculations to give a rough estimate of the potential payback time. There are a range of factors that can influence the outcome, including increases in electricity prices and ongoing maintenance costs, which you might want to factor into your own calculations.

Can I use the Powerwall to load-shift?

Tesla's not only plugging the Powerwall to solar owners – it's also offering it to households without solar so they can take advantage of off-peak electricity prices. The idea is to charge the battery during off-peak times, and then use the stored electricity during peak times. This is known as load-shifting – but it doesn't make much financial sense.

The Powerwall can offset 6.4 kWh of electricity costs, which for Andrew equals $1.40 per day. Charging the Powerwall at Andrew's off-peak rate of 6.92 c/kWh would cost close to $0.52 per day. This gives a saving of $0.88 per day, or around $320 per year. Assuming a Powerwall unit without the inverter would cost around $9,500, this would give a payback time of 29 years.

Powerwall means more than saving money

Even with a long payback time, CHOICE believes many people who can afford the Powerwall unit will still take it up, as the hip-pocket is only one motivator for people choosing to go solar.

There is a real disconnect between Australian consumers and energy companies, with the cost of energy consistently rating as the top concern in our Consumer Pulse surveys. Alarmingly, one Consumer Pulse survey showed 44% of consumers don't trust energy providers, while a more recent survey we conducted showed almost two-thirds of Australians want to be self-sufficient in meeting their energy needs.

This isn't a completely surprising finding when you consider the bulk of a household's electricity bill is tied up with network costs and wholesale electricity prices which consumers have very little control over. While battery storage systems won't give complete independence for most consumers, it does offer a bit more control. And, of course, for many people, there are the added environmental benefits of investing in a solar energy system.

Will battery storage become cheaper?

Costs of battery storage systems have been falling at a rapid rate and forecasts are for this trend to continue as more and more households adopt them. For example, the cost of battery storage fell 14% every year on average between 2007 and 2014, according to a report by the Climate Council, and it's expected that prices will halve again within the next five years.

Solar panels are also getting cheaper, with the Climate Council reporting a 75% drop in price over the past five years.

With the global market for solar panels and battery storage expected to grow tenfold by 2020, the demand for battery systems like the Powerwall should have flow-on effects on prices as economies of scale kick in.

CHOICE to put batteries to the test

CHOICE is looking to put the Powerwall and its competitors to the test to see how they fare under real world scenarios. We have already begun testing solar panels in collaboration with CSIRO, so looking at battery storage systems is the natural next step.

In the meantime, if you're considering installing a solar power system in your home, we have a few resources to help:

  • Our solar panels buying guide spells out what you need to consider when buying a solar power system for your home, including how solar PV systems work and how to choose an installer.
  • Our survey of members' experiences with their solar panels and inverters makes for valuable reading when you're trying to weigh up the word-of-mouth advice you're likely to get, such as whether you should go for German- or Chinese-made panels, and which brands and suppliers are the most popular.
  • Our look at financing rooftop solar systems through leasing and PV purchasing agreements will tell you all you need to know if you can't pay for a solar panel system outright.