Tesla CEO Elon Musk has said that the company is already achieving “good margins” on the residential Powerwall product, but that “some additional work is needed” for its utility-scale Megapack to do so. Contact online >>
Tesla CEO Elon Musk has said that the company is already achieving “good margins” on the residential Powerwall product, but that “some additional work is needed” for its utility-scale Megapack to do so.
In reporting its first quarter financial results for 2021, the company noted that its energy storage installations stood at 445MWh for the three month period, which was a 70% increase year-on-year versus Q1 2020 (260MWh) but a similar drop again of about 70% from 1.5GWh installed in Q4 2020.
In a presentation prepared for shareholders, Tesla said the year-on-year increase was driven mainly by “the popularity of Powerwall,” with demand far exceeding production rate. Blackout events such as that experienced in Texas for several days in February are driving customers towards buying home energy storage solutions, the company said.
This gap between available supply and high demand is what led Tesla to decide to only make Powerwall available to solar customers — and decided only to make its solar PV system product available in combination with Powerwalls. It may later decide to unbundle the products and sell standalone Powerwalls as production rates increase.
In Q4 2020 reporting, its high total of 1,584MWh of energy storage system (ESS) deployments had conversely been largely attributed to utility-scale systems. In Q3 2020 as well, the company had said that demand for both Megapacks and Powerwalls was outstripping supply, doubling its production volumes of the grid-scale systems in response.This time out, Tesla noted in its investor deck that due to “specific project milestones”, deployments can vary from quarter to quarter. With an increasing number of utility-scale projects using dozens or even a hundred or more megawatts and megawatt-hours of batteries per system, any lull in project development could have a significant knock-on effect; whereas each individual Powerwall 2 product comes with 13.5kWh capacity.
In an earnings call with analysts, Pierre Ferragu, an analyst with telecoms and tech researchers New Street Research asked what Tesla’s gross margins “look like” for storage and what its ambitions might be in terms of gross margin for that business.
Musk, who has recently adopted the self-styled title of “Technoking of Tesla” alongside his more formal CEO title, said that Tesla is “aiming for comparable margins in storage as in vehicles”. However, he said, the vehicle business is more mature than energy storage. Tesla is “already at good margins with the Powerwall, but some additional work is needed for the Megapack to achieve good margins,” he said.
Drew Baglino, Tesla’s SVP of powertrain and energy engineering — who appeared on stage with Musk at last year’s much talked about Battery Day — agreed and said that after three years of producing Powerwall 2, good margins have been achieved, “but Megapack has more room to go to achieve our targets”. Musk added to that that Tesla has a “clear runway for improving the cost for the megawatt-hours for the Megapack”. EachMegapackhas1.5MW inverter output and 3MWh capacity and the productwas launched in the summer of 2019.
Elsewhere, Musk also said that bundling the Solar Roof — which has had a slow and challenging path from factory to customers’ homes in many cases since its 2016 launch—as well as its regular solar panels with the Powerwallwill make home installations “much easier”, due to the power from the PV going directly into the battery system.
The CEO talked up the ability of the Powerwall to give households energy security in the event of utility blackouts, as well as the ability of the ESS to help utilities to stabilise the grid. He said that the way that aggregated home energy systems could “operate as a giant distributed utility” was “profound”. As the popularity of EVs grows, power needs from homes and businesses will go up significantly, and extreme weather events will put further strain on utilities’ ability to supply electricity reliably, which he described as a “recipe for disaster”.
In addition to home storage, Musk said large-scale battery storage at utility level is “important to have”, to help integrate the variable generation from solar and wind. This need can be answered with lithium-ion batteries at current global levels of renewable penetration on grids, and the company believes lithium iron phosphate will form the vast majority of stationary storage capacity, the CEO said. In contrast to shortages of materials like nickel used in different lithium-ion cells of high energy density like nickel manganese cobalt (NMC), which are also widely used for electric transport, “there is no shortage of anything whatsoever in iron phosphate lithium-ion cells, he said.
Meanwhile, where there has been growing discussion of the need for energy storage that can store energy for many hours or even days, weeks or months aka seasonal storage, Musk said that “we have got a long way to go before we are dealing with seasonal technology issues”.
“We should tax energy that we think is probably bad and support energy that we think is probably good. Just like cigarettes and alcohol. Just like fruits and vegetables. It’s just common sense,” he said.
Read yesterday’s coverage of the Tesla results on PV Tech for more details on the company’sfinancial performance, including solar installations for the first quarter of 2021.
Earnings call transcript by Seeking Alpha.
First introduced in 2015, the Tesla Powerwall has dominated the global residential energy storage market ever since. The market is booming recently, with products of great variety, thanks to global trends, market maturity, and supporting policies. In this article, we will look into the Tesla Powerwall, examining its development and business model in terms of system performance and pricing strategy.
Home energy storage products all come in different capacities, power outputs, and ways of coupling. Unlike regular energy-storage batteries, which normally include battery packs and a battery management system (BMS), the Powerwall is an integrated battery system consisting of batteries, communication protocol, and a monitoring program, providing users with real-time feedbacks and information, such as usage data and power flows.
Tesla uses 18650 NCM battery cells for Powerwall 1, then 2170 NMC cells for Powerwall 2. The 2170 NMC cell has higher energy density and is capable of longer operating time. The use of which makes the system heavier but smaller in volume and has greater storage capacity. Tesla mulls switching to LFP batteries it co-developed with CATL, which are cheaper and have steadier performance.
In addition to the choice of cells, Tesla has raised storage capacity more than double from 6.4 kWh of Powerwall 1 to 13.5 kWh of Powerwall 2, whilst changing from DC-coupling to AC-coupling. All these adjustments underline Tesla’s renewed focus on the residential self-consumption energy storage market.
Solar panels produce direct current (DC) electricity. Powerwall 1 can work directly with solar panels and charge from the electricity generated. Whereas inverters must be paired for households to utilize the harvested power. Therefore, Powerwall 1 shall be installed along with solar systems to achieve higher conversion efficiency.
Powerwall 2 has a built-in hybrid inverter, which converts alternating current (AC) to DC to charge the system and vice versa to provide for domestic appliances. Despite lower conversion efficiency, the AC-coupled energy storage solution allows households who have installed solar systems to add energy storage systems without dismantling existing inverters. Therefore, for households with solar systems, Powerwall 2 is a more convenient choice.
From Powerwall 1 to Powerwall 2, Tesla re-positions the product from a small-capacity device serving for grid stability and peak-shaving operation, to an integration of larger-capacity hardware and multi-purpose software solution, shifting focus to self-consumption, time-of-use rate management, and backup power sources.
In April 2021, Elon Musk announced that Tesla’s energy storage products and solar system products will only be sold together as an integrated product. Customers may not install Powerwall without purchasing Tesla’s solar products. Later that year, Musk eased up on the rule, allowing people to get Powerwall from Tesla certified installers, while the product remains unpurchasable independently on Tesla’s official website.
Powerwall 1 was priced at US$ 3,000 when it was first launched in 2015. In 2022, prices rose to US$ 11,500 for Powerwall 2 due to surging demand and product upgrades. To install the Powerwall, buyers take the Virtual Home Assessment on Tesla’s official website, uploading their monthly utility bill for Tesla to estimate the preferable solar and energy storage capacities.
For example, a 7.2-kW solar system paired with Powerwall 2 costs US$ 28,276. Ruling out US$ 11,500 of ESS installation costs, solar power costs US$ 2.3 per watt. Since Tesla provides a discount of US$ 2,700 for customers installing solar and energy storage systems at the same time, the final cost is approximately US$ 25,576. Factoring in the U.S. federal ITC, customers only pay US$ 17,903. The energy storage system alone costs US$ 6,160, US$ 456.2 per kWh on average.
In addition to Tesla’s official bargain prices and the U.S. federal ITC, people may acquire varying discounts by selecting certain utility companies. Moreover, Tesla offers to install as many as ten sets of the Powerwall system at a time, for many households choose to install at least two sets of energy storage systems to save installation costs, increase self-consumption ratio, and charge their EVs.
Table 1 is a comparison of Powerwall 1, Powerwall 2, and Powerwall+. In addition to the increase in energy capacity, installation procedures are simplified, whilst the main purpose of the product changes from maintaining grid stability to self-consumption, controlling time-of-use rate, monitoring solar power generation, and charging EVs.
Most residential energy storage solution suppliers cooperate with distributors and installers to maximize profit through vertical separation. But Tesla, as a premium brand, keeps the business running even when integrating energy storage solutions with other products. In December 2022, Tesla Eclectic was registered with the State of Texas, allowing owners of the Powerwall to sell surplus solar power back to the grid at peak times. The act accentuates Tesla’s efforts to build a virtual power plant, consolidating the company’s vertical integration, and underscoring its confidence in its own products.
Database contains the global lithium-ion battery market supply and demand analysis, focusing on the cell segment in the ESS sector. We compile detailed data on various businesses' capacity, production, and shipments, as well as segmenting the market applications such as FTM, BTM-C&I, and BTM-Residential.
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