Can Elon Musk's battery really cut your power lines?

Is lithium-ion the right technology?


To eliminate the world's dependency on fossil fuel-generated power, all you need is two billion of Tesla's new commercial-grade battery systems.

That was part of Tesla CEO Elon Musk's message last week, when he announced a new line of batteries for households and businesses, which will allow distributed electrical storage from renewable sources like solar power.

Sounds crazy, right? However, as Musk pointed out, the area needed to power the entire globe with photovoltaic panels would be less than 1% of the U.S.'s total land mass, and most of that could be deployed on rooftops.

According to a 2008 analysis by the National Renewable Energy Laboratory, supplying all of the U.S.'s electricity needs with photovoltaic solar energy would require roughly 0.6% of the country's total land area or 1,948 square feet per person.

"Actually very little land is needed to get rid of all fossil fuel generation in the United States," Musk said. "It's really not much. You won't need to disturb land. You won't need to find new areas," Musk said.

Dean Frankel, an associate at Lux Research, calls Musk correct "on the fundamentals."

The sun generates enough solar energy on the earth's surface every hour to meet the world's total annual energy consumption. So there's more than enough energy to harvest.

To further illustrate the viability of using battery storage to supplement renewables during off hours or inclement weather, Musk keyed in on Tesla's current main product: cars.

The number of vehicles on the world's roadways, he said, total about two billion, the same as the number of batteries needed to power the globe's energy needs.

"And, every 20 years that [two billion vehicles] gets refreshed," Musk said. "This is actually within the power of humanity to do. ... And, it's something we're obviously starting to do with Gigafactory."

Tesla's first battery "Gigafactory" is under construction outside of Reno, Nev.; it is expected to go online next year and produce 500,000 lithium-ion batteries every year.

Tesla's battery systems include two consumer-grade batteries -- the Powerwall line -- that store 7 kilowatt hours (kWh) and 10kWh worth of power and cost $3,000 and $3,500, respectively. A third battery system for commercial use is called the Powerpack; it can store 100kWh and will sell for $25,000.

models powerwall sized Tesla

Tesla's new Powerwall battery (top left) comes in two sizes, a 7mWh and 10mWh model. The batteries will cost $3,000 and $3,500, respectively.

Up to nine Powerwall batteries can be connected on either an outside or indoor wall, for up to 90kWh of power. For their part, the Powerpack systems are limitless in their scalability, Musk said; with enough of them, you could even power a small city, he claimed.

What could go wrong?

In the U.S., the average household uses 30kWh of power each day, at a peak use rate of 1.2kW, according to the U.S. Energy Information Agency. Tesla's Powerwall batteries can provide 2kW of continuous power and has a peak power rating of 3kW. The average home, however, would need three Tesla 10kWh batteries, at a cost of over $10,000, to meet all its energy needs, something Lux Research's Frankel is dubious will happen.

During a press conference at Tesla's design studios in Hawthorne, Calif., last week, Musk spoke passionately about the need to rid the world of fossil fuel dependence.

"This is how it is today," said Musk, pointing a projector screen with a photo of coal-fired power plants billowing dark gray smoke into the air. "It sucks."

Musk then pointed to a graphic called The Keeling Curve, which tracks the amount of CO2 (greenhouse gases) in the atmosphere. Since 1960, they've increased from 315 parts per million (ppm) to 400ppm today.

"Every day it ratchets up. If we do nothing, that's where it's headed. To levels that we don't even see in the fossil record," Musk said. "I think we collectively should do something about this and not try to win the Darwin Award."

As admirable as Musk's vision may be, Frankel doesn't believe coal-fired power plants, which make up the bulk of energy production in the U.S. and around the world, will be going away anytime soon. The sheer cost of ramping up solar production to the levels Musk envisions would be "astronomical" and take decades, Frankel said.

Today, for example, the U.S. gets only about 1% of its power from solar.

"Elon's vision of [an] all-renewable future, and storage being the missing piece, is in some ways an idealist vision and one that will not likely happen as any sort of medium-term opportunity," Frankel said.

Tesla is open-sourcing its battery technology as well as its Gigafactory's blueprints and processes, in the hope that other companies will emulate it and make their own, Musk said.

Musk believes home and business battery uptake will follow a similar trend to cellular phones, where in developing nations landline deployment was leapfrogged by the new technology.

"There wasn't a need to put land lines in at lot of countries or remote locations. So people in remote villages or islands somewhere can take solar panels and combine them with the Tesla Powerwall and never have to worry about having electricity lines," Musk said.

Because of Tesla's experience in developing batteries for its electric vehicles, it brings a more sophisticated battery system to homes and businesses than do other suppliers, according to Anise Dehamna, principal research analyst at Navigant Research. For example, Tesla's battery system has more advanced thermo management, which is crucial for safety.

"Tesla's also in a very good position to bundle their tech with SolarCity into single offering," Dehamna said. SolarCity is the largest installer of residential solar panels in the U.S., and Musk is SolarCity's chairman. "And, Solar City just announced a partnership with NEST, so it can connect the system to [a] smart thermostat."

Tesla Powerpack Tesla

Tesla's Powerpack battery system for commercial operations can scale limitlesslly, according to CEO Elon Musk. Each unit can hold 100kWh of capacity and will sell for $25,000 each.

A smart thermostat learns usage patterns and adjusts the temperature based on what the homeowner will likely want.

Dehamna said there's a stronger business case for commercial solar power combined with battery storage than the model for residential use. That's because during peak demand hours, utilities add surcharges for businesses that exceed predetermined electricity limits.

So, the more a businesses can rely on solar power and battery storage, the less they'll exceed those preset power limits.

"For example, a business may have an agreement with a utility to not exceed 100kW of power use at any time. The agreement may state that for every kilowatt over that limit, they'll be charged an additional $45," Dehamna said.

"It's based on the most you go over in any 15-minute period in a [billing] month, Dehamna said.

Conversely, it's "very challenging" to build a business case for battery storage in residential solar systems because there's not enough difference between between nighttime and daytime energy use, Dehamna said.

Amit Ronen, director of George Washington University's Solar Institute, said electrical storage, whether using batteries or other methods, is a key component to transitioning to a renewable generation system, but this is not a magic bullet for getting off of fossil fuels.

"We need a massive ramp-up of a range of fuel-free energy generation sources, a much smarter grid that is able to integrate all those resources and a pricing system that accurately prices electricity for peak periods and its impact on the environment," Ronen said.

Are lithium-ion batteries the right technology?

Another issue raised by experts is the volatility of lithium-ion (Li-ion) batteries, which combust when exposed to oxygen.

Some, like Ronen, believe Li-ion technology is both safe and has an enormous leap on the competition. Ronen said Li-ion batteries are a proven technology -- used in everything from smartphones to laptops and cars.

And the cost of Li-ion will come down quickly as production ramps up, just like what happened with photovoltaic panels. Those prices came down 80% in the last five years because of mass production and manufacturing efficiencies, Ronen said.

Within five years, Li-ion will represent 70% to 80% of the battery market, both Ronen and Frankel said, because it's a flexible technology that can power anything from an Apple Watch to a corporate data center.

But not everyone is convinced Li-ion batteries are completely safe.

"There are legitimate safety concerns," said Frankel. "There have been notable product failures, from cell phones to laptops and even Tesla's [cars]."

Other technologies, such as chemical flow batteries, have an advantage over Li-ion batteries when it comes to scalability, Frankel said.

Flow batteries get their name because they use liquid chemicals (electrolytes) that are separated by a membrane. The reaction between the two chemicals frees up electrons, creating electricity.

Flow battery diagram Imergy

How a flow battery works. Two fluids -- one a negative electrolyte and the other a positive electrolyte -- are separated by a membrane. The reaction between the two chemicals releases electrons, which can be harvested as electricity.

Flow batteries and Li-ion batteries work well with intermittent energy sources such as solar panels and wind turbines because of their ability to be idle for long periods without losing a charge. But flow batteries scale more easily because all that's needed to grow capacity is more liquid; the hardware remains the same.

So flow batteries have the potential to be less expensive than Li-ion batteries. They also have a longer duration, according to Frankel. At full discharge, Li-ion last only four hours. In order to get twice that length of charge, another complete battery unit must be added, Frankel said.

For a flow battery system, the cost is currently $755/kWh for a 4-hour battery, according to Franek. That cost is expected to fall to $516/kWh by 2024. For large scale Li-ion systems costs will fall from $626/kWh in this year to $498/kWh in 2025.

So on a per-kilowatt basis, Vanadium flow batteries will almost always be more expensive. However, on a per kilowatt hour basis (i.e., how long they can run depending on how large the electrolyte fluid tanks are) they can be cheaper. The larger the tanks, the more power you can get.

"This is what is attractive about flow batteries, that power and energy scale independently," Frankel said.

Additionally, cheap Li-ion battery cells made in the Gigafactory are only part of the puzzle. Unlike electric vehicles, in stationary batteries for homes and businesses, there is more of a relative cost contribution coming from power electronics, software, and installation.

"Without more vertical integration – and perhaps even some acquisitions and Gigafactory-like efforts dedicated to inverters – Tesla is limiting its growth potential here," Frankel said. Inverters are required on any solar power or battery system to convert direct current to alternating current.

Bill Watkins, CEO of Imergy Power Systems, said the problem with lithium-ion batteries like what Tesla is planning to produce is a relatively low number of charge/discharge cycles over the battery's life.

"The battery gradually begins to wear out... and lose its capacity," Watkins said. "For homeowners, this means replacing their battery more frequently -- and that adds up quickly."

Imergy Power Systems is another grid and residential energy storage provider. It makes vanadium-flow batteries from industrial waste, rather than digging for new vanadium, which is more costly. The U.S. currently has only one vanadium mine, which is located in Nevada.

One of the advantages of flow batteries is they can be charged and recharged nearly an unlimited number of times without degradation, according to Watkins.

While Watkins admits to a higher initial cost for vanadium flow batteries, he said such comparisons fail to account for other factors that impact overall system cost. Watkins pointed to the levelized cost of energy (LCOE), which factors in the system's useful life, operating and maintenance costs, round-trip power efficiency and residual value.

Because flow batteries, like the vanadium-flow batteries Imergy makes, are very long-lived, deliver more cycles and can be used for multiple applications, "the overall cost structure is substantially below the pricing for an equivalent capability delivered by lithium batteries," Watkins claimed.

Lithium ion battery chart Navigant Research

Lithium-ion batteries are expected to dominate the storage market in about five years, making up about 80% of units sold.

One problem with flow batteries is that they're enormous. In order to power a house, you'd need a flow battery about half the size of your garage, Frankel said.

In the end, the distributed energy market will probably use a range of different battery technologies, Frankel added.

In the way of Musk's renewable energy utopia are governments that have been doing business with fossil fuel suppliers for more than 100 years, and developing nations that need an established energy source.

For example, China's government is dealing with massive consumer growth, which for the immediate future can only be satiated by established energy technologies such as fossil fuels. While the government recognizes the need to reduce pollution, and has established some policies such as driving restrictions to do that, it's also under the gun to enable economic expansion in a nation with 1.2 billion people.

"When China looks across the globe to the U.S., they see the west as having used fossil fuels for 140 years and they've been expanding its use for the last 20 years. So they're going to say mind your own business," said Brian Buchwald, CEO of Chinese market data firm Bomoda. "They're not concerned with the impact on the rest of globe."

Copyright © 2015 IDG Communications, Inc.

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