Tesla Fails to Refute IER's Powerwall Article

In a recent Washington Post column[i], Charles Lane characterized the media’s coverage of billionaire Elon Musk as, “the most fawning media treatment of any public figure since Pravda covered Stalin.” We saw this once again when Engadget, a popular technology website, dared to cover our recent article explaining the economics of Tesla’s Powerwall.

The first version of Engadget’s article was fair[ii], but then Tesla’s PR machine kicked into gear and the article was updated[iii]. The updated article says that we used “shaky math” and “does not represent real-world conditions for the Tesla Powerwall and [IER’s report] deals in misleading data.” Engadget’s reporter, Jessica Conditt, fails to explain why our math is shaky and our data misleading.

Our analysis of the finances of Tesla’s Powerwall battery found that the payback period for purchasing Powerwall would be 38 years with on-peak rates at $0.15 per kilowatt hour and off-peak rates at $0.06 per kilowatt hour.[iv] First, it should be noted that peak rate pricing in the United States is very rare. According to a 2012 study, the Federal Energy Regulatory Commission found that only 1 percent of U.S. residences have off-peak vs. on-peak electricity rates. Using peak-rate pricing in our analysis makes the Powerwall more economic than it would otherwise be for the 99 percent of residences that do not have peak-rate pricing.

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Second, in Tesla’s response to the Engadget article, they claim that rates were “undocumented rates.” The rates we used were typical rates and not out of the ordinary. For example, the rates provided by Green Mountain Power Corporation, whose rates are $0.17356 per kilowatt hour on-peak and $0.07715 cents per kilowatt hour off-peak,[v] are very close to our example. Using the Green Mountain Power Corp. rates, the payback period is 37 years at an installed cost for Powerwall of $7,340 or 36 years at the installed cost of $7,140 from Elon Musk’s Solar City[vi].

However, the difference between peak and off-peak rates for some utilities are much, much smaller. In Washington D.C., Pepco charges $0.145 per kilowatt hour for peak electricity and $0.132 per kilowatt hour for off peak electricity during the summer.[vii] If we had used these rates in our analysis, Powerwall would be totally uneconomic because there is no benefit in using a battery system when there is little or no difference between peak and off peak rates.

Green Mountain Power has offered the Powerwall for $6,500 to its customers. At that installed cost and the Green Mountain rates noted above, the payback period is reduced to 32 years. However, that is still over 3 times the warranty period. The warranty period is critical for Powerwall because Powerwall is a lithium-ion battery, which is the same type of battery used in laptop computers and cell phones. Despite Tesla having state-of-the-art electronic controls for its batteries, having a laptop battery lasting more than 30 years is asking a lot.

Engadget also says that the customer has the option to pay Green Mountain $37.50 per month for the Powerwall with no money down. Over the 10-year Powerwall warranty period, the Green Mountain Power customer would pay the utility $4,500—$2,000 short of the $6,500. At $37.50 per month, it would take 14.45 years for the customer to fully payback the $6,500 to Green Mountain Power for Powerwall.

Source: Institute for Energy Research
Date: Jan 10, 2016