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Poor economics for batteries at the industrial scale and to power a home

Industrial backup power system consisting of many batteries. Photo courtesy of Adobe Stock.

Someday some wizard will develop a chemistry breakthrough that will do for storage of electricity what horizontal drilling and hydraulic fracturing has done for oil and gas production.

In the meantime, the cost for battery storage of electricity is staggering.

5/22/17 – Wall Street Journal – The Race to Build a Better Big Battery – The unreliable intermittent nature of solar power is a massive problem blocking the way of solar being a viable substitute for fossil fuels.

Major efforts are underway to figure out some way to store electricity on an industrial scale.

One cited experiment is being run by Greet Mountain Power. They have a 7,722 panel solar plant which has a theoretical capacity of providing the power to 2,000 homes when the weather conditions are right.

They have installed an industrial grade battery bank in two containers each the size of a tractor-trailer. It can store 3.4 MWh, which is cited as being enough power for 170 homes assuming it was sunny the day before.

Let’s look at the costs.

Cost is $12.8M, consisting of a $0.3M government subsidy and $12.5M of the utility’s money.

The cost per megawatt-hour storage:

  • $12.8M – cost
  • 3.4 MWh – storage capacity
  • $3.76M/MWh
  • $3.76/watt hour
  • $3,765/kWh

Spread that over 30 years (I think that is an overly generous assumption) at 365 days a year and the cost is $0.34 per kilowatt-hour ($3,760/kWh  /  30 years  /  365 days ). That is only several times more expensive than what consumers usually pay for electricity. That would be, oh, somewhere around 5 times wholesale prices. Maybe 10 times?

Keep in mind that is an add-on cost after the electricity has been generated.

When someone figures out how to break the barrier in chemistry laws to drop that cost by a factor of 10 or 20, storage of electricity at industrial scale will be viable.

5/22/17 – Wall Street Journal – Home Batteries Aren’t Broadly Economical – Yet – The headline writer is astoundingly optimistic.

Article also doesn’t provide any numbers but says consumers would not save money from using home batteries.

Current costs are running something in this range for a 14 kWh battery according to the article:

  • 5,500 – Tesla Powerwall battery
  • 700 – hardware
  • 2,000 – ball park for installation
  • ~8,000 – estimate of total cost

What can one battery do?

Article says one battery would likely not be sufficient to power a home. Article says the Tesla website says one battery would only be enough to run lights and a refrigerator for one day. So that $8,000 would not buy enough storage to also use the air conditioner or washer.

I previously did some calculations on what battery backup might look like for my home. I calculate it would take 6 batteries to provide storage for the electricity I use in the summer.

My guess is that would increase my electricity costs of going off-grid by a factor of merely 3 (if I want to sweat out the summers) or 5 (should I not want to melt for about 2 months a year). That doesn’t include the cost of the solar panels. Three or five times as expensive as what I pay today, plus cost of the panels.

Let’s consider the kWh cost of a battery for the home.

If you want your battery to last until the warranty, you can only discharge it about 70%. That means a 13.5 kWh battery can provide about 9.5 kWh a day.

The cycles covered by warranty are 5,000 for the 6.4 kWh model. Let’s assume that is the cycles in the 13.5 battery.

Let’s spread the cost over the warranted cycles:

  • ~$8,000 – estimated cost
  • 5,000 – assumed warranted cycles
  • $1.60 – cost per warranted cycle
  • 9.5 kWh – output at 70% to avoid wearing out battery early
  • $0.168 – cost per kWh at estimated cost spread over warranted cycles.

A home storage battery will add 16.8 cents to the cost per kilowatt-hour.

By the way, my calculation matches the 17 cent cost per warranted kWh in the cited article quoted in the Wikipedia article.

The cost of storage of electricity is more than the average price paid by consumers in the US, based on the comments in the article. Don’t forget to add in the cost of the solar panels or the cost of electricity purchased overnight to recharge the battery.

Yeah, batteries for home storage of electricity are not economical.

Average cost of electricity for consumers

Article says average cost is $0.1282/ kWh for US homeowners – 12.8 cents a kilowatt-hour. That is according to the EIA.

Rates around the world for 1 kWh:

  • 29.7 – Germany
  • 24.1 – Italy
  • 19.5 – U.K.

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2 thoughts on “Poor economics for batteries at the industrial scale and to power a home

  1. Richard Challis on said:

    Quoting the average price for electricity is misleading as a battery can supply energy when the price is at its highest. Depending on demand the maximum price can be orders of magnitude higher than the average.

    • Hi Richard:
      Average cost for homeowners across the US with a comparison to several European countries provides a frame of reference. I’ve been looking for such a stat and want to get in on my blog. Do you have an indication of the average price paid by consumers in Australia?

      As for what impact that may have on a homeowner, it depends on the pricing structure in place. Here in California, which is the only place I have a working knowledge of the pricing structure, we have have a tier system. The electricity used in each higher tier is priced at increasing cost. The concept of installing solar panels is to cut back enough electricity in total during a month to minimize tier 3 electricity, maybe even only being in tier 2. That is a solar issue.

      I am not aware of what locations use time-of-day pricing. I’ve heard stories suggesting that is something being discussed for California. Not sure what impact that would have but will make a guess it would make solar less economical (electricity generated during the late morning and afternoon would have a lower price than electricity used in the evening) while maybe providing some justification for batteries (could charge batteries at night and discharge them the next evening, playing the arbitrage angle).

      The battery issue only moves electricity from one time to another. So if batteries are charged from the grid at night and then discharged the next day, there is no reduction in consumption for a consumer and pricing for electricity is unaffected. Add solar to the equation to reduce costs means that the solar panels should be credited for any savings. Thus based on what I understand the typical solar installation looks like for a consumer, after allocating savings to the solar installation, the battery installation only increases costs, to the tune of another 17 cents a kilowatt-hour based on spreading the costs over the warranted number of discharges.

      Am I missing something in my calculations?

      At the industrial level, that is a far more complicated issue. Large battery capacity could allow one to avoid high prices, depending on the market at the time, what backup power is otherwise available, what is going on in the spot market, what options or contracts might be in place for on-demand power, how warm it is on any particular day, and other factors I don’t even know about. On the other hand, I’ve read that in Europe when the sun is bright in a lot of places and the wind is at the right speed in a lot of places, there is so much electricity on the market that spot prices collapse.

      Thanks for taking the time to comment.

      Jim

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