Tesla Wins Contract to Help Power the California Grid
bloomberg.com
bloomberg.com
Edit: This will replace the need for peaker plants first (generators of last resort, very expensive, only run a handful of hours a year), and as the cost drops, will slowly push out base load coal and natural gas (by increasing the capacity factor of solar and wind). "Batteries are the new peaker plants", as it were. [1] [2] [3]
This is what it looks like when batteries are used to offset fossil fuel generators (instead of curtailing excess wind and solar, it'll be soaked up by utility batteries such as these). Frequently, depending on renewables output, the spot of price of power can go negative. This means someone gets paid to use that power. This is where utility scale battery storage shines, as its happy to gobble up that power, being paid to do so, and can later be paid to release that power when demand is high.
Edit 2: If Tesla can book this revenue in Q3, combined with their vehicle sales push, they're going to be GAAP profitable for the quarter, which will allow them to close the Solar City acquisition. Well played.
[1] https://en.wikipedia.org/wiki/Peaking_power_plant
[2] http://www.greentechmedia.com/articles/read/dueling-charts-o...
[3] http://www.bloomberg.com/news/articles/2015-12-22/batteries-...
Well planned for sure too. These things don't happen by chance. I'm sure they were planning for this all along. Good for them.
I mean, this entire plant can supply 20 MW and will cost somewhere around $20 million. For that price you can buy two General Electric LM2500 gas turbine generators that can supply 47 MW and will fit in the same space as three 40-ft shipping containers. (These are basically just aircraft engines modified to produce electricity.)
So while this particular sale is of course good for Tesla, I don't see how one can justify this as Tesla "transitioning to a clean energy company". They saw a profitable, but likely one-time, opportunity localised to CA and they took it.
"The fastest loading gas turbine models produce 30% load delivery after 7 minutes" -- http://www.wartsila.com/energy/learning-center/technical-com...
If you've driven a Tesla, you may have noticed that they can reach peak a bit faster than that.
Revenue is revenue. If Tesla is able to cannibalize the peakers to contribute towards its enormous capital expenditures, and continue to reduce costs with the Gigafactory, it only makes utility battery storage more affordable.
There is no scenario where the cost curve per kWh of battery storage goes up.
I'm not sure what you mean by Tesla cannibalizing the peakers? Do they already own traditional peaker plants?
I agree revenue is revenue, I'm just saying this is perhaps unlikely to provide more revenue from sales outside CA.
Tesla's PowerPack installs (battery storage receives federal incentives, nat gas does not) will replace peakers, leaving them as stranded assets (the cannibalization I refer to).
Edit: unepipe: Tesla packs perform the exact same role as a peaker plant: energy on demand.
They are distributed, dispatchable loads and generators, available to draw or release energy from/to the electrical grid as needed, when commanded to do so by a grid operator.
I assume I used "cannibalization" improperly in this context. Mea culpa.
The gist is they can absorb power at a cost that is pretty close to free (when there is excess power flowing through the grid) versus burning a fuel whose price is volatile, a steep declining cost curve for batteries, and aggressive federal government tax incentives.
I'm not sure that should be included in the cost analysis, otherwise anything can be subsidized to the point of being "cheaper".
"From around 1995 through 2010, energy storage costs had fallen by about 14% a year – a rate that means the price will halve in a little more than five years. In 2010 – that rate sped up to 16% a year, and while a 2% increase might seem small it actually means that instead of taking five+ years to halve – it would now take slightly less than four years, more than 20% faster. Tesla’s Gigafactory has now increased the rate of price decrease even faster than the 16%. It is estimated that the Gigafactory, by doing nothing more than moving all of the supply chain arms under a single roof, has decreased the price of battery packs by 30-50% – while doubling the global volume."
https://electrek.co/2016/05/19/the-math-and-evidence-all-aro...
JB Staubel has indicated the same... https://www.youtube.com/watch?v=lgcozueYXMU&feature=youtu.be...
https://electrek.co/2016/09/09/tesla-quietly-reduced-the-pri...
"At the time, the Powerpack was being quoted at $470/kWh, but now we learned that Tesla brought the price down to $445/kWh."
Incidentally Goldman sachs estimates the cost to be around $200/kWh back in February.
http://webcache.googleusercontent.com/search?q=cache:n5WQK1A...
The batteries will nibble away at the most expensive peaks first, the plants that run for only very short periods per year.
Meanwhile solar and wind will roll out to displace fossil fuel usage as well. Ideally they'll meet in the middle at some point, but it appears financially viable for this process to start now, and await further drops in pricing to expand later.
Otherwise there will be a big jump in demand for batteries, as power companies will be looking for hundreds of GWh of battery capacity. If they make a yearly profit for the power company that's significant enough to warrant the CAPEX of replacement, increasing the battery price by 10% only means one or two more years before break-even. So power companies could easily afford that if we assume the investment at current price levels is profitable for them.
That is going to significantly (negatively) affect the price developments of batteries and constrain supply even more than today, so EV manufacturers will be faced with either losing (more) money on each car or increasing prices and selling less cars.
Unless we assume Tesla is looking to pivot out of EVs in general, but I think that's a rather absurd assumption given their current actions.
Tesla is selling internally to themselves, and already has production set up for batteries for stationary power.
The best outcome is for demand to ramp up, keeping prices high long enough to fund the rest of the construction of the gigafactory.
No praying required.
Sure car batteries and power banks are different, but they're all Li-ion and I believe Tesla (unlike others) is packing 18650's in both.
(What is the net present value of $1000 in 2020? 2025?)
This would be a great thing for EVs. At worst it will be a few years of slowed down growth for EVs just like we're seeing now with cheap oil. These are all temporary, and neither will "kill EVs". And after the dust has settled, you'll probably see $50-$70/KWh batteries in cars.
Also, there are other vendors happy to sell more batteries, including alternative technologies which are unsuited to cars but very suited to static power battery stations. (eg, Flow Batteries)
So current peakers will not be stranded assets, especially because the life of batteries is likely less than 20 years.
I'm really very interested in the economy and technology associated with deploying clean energy. I'm an idealist and want to see green power, but only in a way that makes sense. And I'd like to profit it from tracking the process.
Have you got any other resources or directions to go to find more information like this? I've found this: https://sam.nrel.gov/download
I ask for I am uneducated in this area.
i don't know anything about power, but this is faulty business logic. we do plenty of stuff that isn't profitable, but rather is value-add to either win or retain business.
They're probably not profitable in the usual sense of the word. Instead they're just required by the regulators that enforce the utility monopoly and set the utility rates such that the power company doesn't go out of business.
Lithium shortage.
A commercially viable way to extract it from seawater would likely solve any supply problems indefinitely.
This, of course, doesn't address the need for Cobalt, but I'm not sure how much is required for the process.
This is exactly what could lead to a shortage. This, demand that is (currently) outstripping supply and the long ramp up time for new operations.
https://en.wikipedia.org/wiki/Flow_battery
http://www.renewableenergyworld.com/articles/2015/08/hecate-...
"The rest of the world" also has measurably more expensive gas. ($10/mmBTU for large scale users around here).
<3 Dinorwig. The tour there is pretty cool if you get the opportunity.
In the US, gas companies seem to be having issues expanding natural gas distribution recently. Plenty of cancelled projects, lots of protests on construction sites, etc.
And it's not risk aversion. Its buried subtly in the article but part of SoCal's gas infrastructure is shut down because of the leak. They literally can't provide enough gas to generate enough electricity for peak demand. So they will generate over capacity at night, store in the batteries, and discharge during the day.
Also what seems to be lost here is that Tesla created it's utility battery products as a renewables play, but are just taking advantage of extra-ordinary circumstances in this case.
Base and peak loads on the grid can be wildly different. Without storage, if you want to avoid brownouts or blackouts, your generating capacity needs to match the peak load, even though you might only hit peak load a few times per year. The traditional way to handle this is to have power plants that can be spun up rapidly but sit idle 99% of the time. Because they're idle most of the time, the electricity they produce is extremely expensive.
Storage (including batteries, but also many other technologies) can substitute for these plants. You fill the storage when demand is low, then drain it when demand is high. Yes, the energy still needs to be generated somewhere, but you can generate it using existing plants during periods of low demand. If this is cheaper than maintaining peaking plants that mostly sit idle, it's a win.
it will be interesting to see how Tesla makes money. it's probably mainly a test site.
My point was (1) when comparing peakers vs storage you need to consider the cost of: Off-peak generation + storage cost vs peaker cost. (2) This wasn't a cost driven thing. This is a demand driven thing.
It's still a cost driven thing. They could be emergency-buying or emergency-relocating gas infrastructure over the next few months.
And of course it was a cost driven thing. This is the cheapest way to meet the demand. If there were a cheaper way, they would have taken that.
Otoh, a gas tank requires only O(E^(2/3)) material, while a battery requires O(E) material, where E = stored energy.
The fact is, most parts of the country don't have good energy storage options. Plenty, like Florida for example, are almost exclusively coal + natural gas and some nuclear. The advantage of these battery facilities is that they enable transitions away from coal and natural gas.
The nice thing about the Bloom fuel cells is very efficient conversion of natural gas to electricity, the weakness is that it's response time is long (an hour or more to change its output by 50%). The nice thing about LiOn battery packs like the ones in Tesla cars are that they respond instantly to various power demands, can deliver massive amounts of power in a short period of time, and recharge again and again.
This combination would let me supply all of my house power under all circumstances using nothing but natural gas. That would take my house completely off the grid infrastructure for PG&E (although I would still be a gas customer).
C'mon Elon, make it possible! :-)
This is < 0.1% of the total number of homes in SoCal, just to put it in perspective.
Batteries aren't great for large amounts of power for long periods of time (yet). What they are good at is smoothing out the supply curve from potentially intermittent suppliers like solar and wind, and that is one of the things that causes price spikes.
Also, trading off the reliability of power.
This seems outrageous to many of us in the West, but here in Australia our power utility already cuts power to neighborhoods in half hour blocks during peak power consumption during summer (I believe they exclude hospitals and some other sites like that from this policy).
The infrastructure savings made by this are huge (think of 99% reliability vs 99.99% in software), and the few that really need it can invest in backup solutions for those times.
Do those power utility savings translate into savings to the people who are cut off? I for one would not want to trade electricity price for reliability.
99% uptime means 7 hours of downtime every month. And it's not random downtime, it's downtime under peak demand.
If the choice was free electricity at 99% uptime and you have to take care of the rest yourself, or $0.13 / kWh for 99.999% uptime, I would go for the 0.13 / kWh.
Of course in AUS they probably charge more than 0.13 / kWh and make you deal with the brownouts anyway. Actually some quick searches reveal AUS pays about the highest rates in the world.
Reliably not being able to handle peak demand isn't a cost saving measure, it's an excuse for a major failure of the infrastructure.
In much of the world those cost saving are directly applicable. Most of the world's population doesn't have 99% reliable electricity, and so they build reliability at the edges with everything from batteries in phone towers, to batteries in lighting.
It isn't at all clear to me if this is more or less expensive for new infrastructure. Given the increasing popularity of roof-top solar, the pricing model for 24/7 reliable wiring doesn't work out now in places where it is already built out. Network operators are trying various legislative measures to get subsidies for the networks, because no one wants to pay the rates they cost to maintain.
If I had free (or very cheap) electricity 99% of the time, spending $5K to get 99.99% reliability via a battery system is very tempting (and we are getting close to that point now). $1K for 99.9% - maybe.
One interesting thing is that the distribution of the downtime matters.
For countries who don't yet have a reliable electric grid, I think investing in providing quality / reliable electricity to their population is about the best ROI (after providing reliable drinking water) investment they can make.
The economic cost of blackouts and brownouts are extremely high [1] -- for example, the rolling backouts in California back in 2000 - 2001 were estimated to cause GDP loss of 0.7 - 1.5%! (GDP was ~1.2T, so we're talking economic losses on the order of $10 billion).
[1] - http://www.raeng.org.uk/publications/reports/counting-the-co...
I'm assuming you are talking USD, if so? Are you sure you have your numbers correct? That seems ridiculously expensive compared to say Australia. First link on DuckDuckGo: https://www.solarquotes.com.au/panels/cost/
Here in the Netherlands, our complete solar system with installation cost us EUR 4,500, and we do run some AC in the hottest summer months. We are currently generating more than we use, with a household of 2 adults and 4 kids.
Solar is separate - I'm talking about charging the battery from the grid.
Brownouts are expensive, but so is the cost of making sure they don't happen. Peaker plants cost more than $10m/year without even turning them on[2]. There are over 40 in California[3] currently available. Hopefully they don't all cost $10M each to keep available, but it doesn't take many years to surpass that $10B cost...
[1] http://www.wholesalesolar.com/tesla-powerwall-for-solar
[2] http://www.nj.com/business/index.ssf/2010/07/peakers_plants_...
[3] http://www.energy.ca.gov/maps/powerplants/EmergencyPeakerPow...
Buildings can design load leveling into their systems with things like thermal energy storage that shifts air conditioning consumption off-peak by freezing ice overnight and using it to cool the building during the day.
One example with a Calmac IceBank system: http://www.greenbuildingadvisor.com/blogs/dept/energy-soluti...
It'll probably be more meaningful in some industrial plants though, if there's any such energy-intensive industry.
And if electric cars also plug in at work... jackpot.
Then all the rechargeable cars become part of the battery moderation of the whole grid!
That's a no-brainer compared to paying the owner for shortening the life of the battery.
Most of benefits come if you have a system which can regulate slightly your use of air conditioning and heating (and a few other things like pool pumps).
In some cases you can save 50% of a daily powerbill by turning off the compressor in an air conditioner for 15 minutes.. but the right 15 minutes.
Few people would get up and turn off the air con for that, but a system that let you say how much you want to spend on it that you setup once makes a lot of sense.
What a great problem that will be.
You will end up with some kind of "smart device" router that connects to your internet/home network to talk to the power company, and uses a commodity wifi interface to talk to your smart devices. The cost of an ESP8266 is already sub-$7 at hobbyist volumes, you can expect the additional hardware cost to easily be driven to trivial levels with widespread adoption.
The problem is purely in getting a standard system out there and designing devices that incorporate the new control model.
Also, using a website or other resource run by the power company is still talking to the power company. Not sure ho else you could have parsed that, but you clearly had some crossed wires there.
The same goes for an electric water heater.
The charger for your Tesla can also adjust when it charges based on power prices.
The dishwasher/washer/dryer can be set to come on at night when the power rates dip.
Exterior lights can dim if the power rates go up.
All that is needed is a way to get the spot price of electricity from the internet, similar to how I can get the current temperature in Anchorage. Devices don't need to talk to the power grid.
And if you're /not/ getting billed by the minute, what's in it for the buyer to choose an AC that sometimes turns itself off?
Of course, the power company having billing by the minute will then create the incentive for such an A/C. That's the whole point!
But you need everyone to be wired for this in order for a small change to add up to a big impact. Which isn't worth the cost unless it's mandated. Which is a political mess.
So we solve the problem another way; with batteries to meet the peak power demand at a reasonable cost, and not demand a massive IoT network, constantly monitoring usage and with override control authority.
The system will convert over as people normally replace their appliances, just like bluray has pushed out dvd players.
Of course there should be some mechanism involved to prevent all washing machines to turn on at exactly the same moment the moment it dips...
I know there have been pilots with some of the larger pumping stations to incorporate the current real time price of electricity, as well as the forecast rain within the next few hours to decide when to turn on. Not sure if it's actually used in production now.
That sort of thing is a great fit for that problem.
Which goes a long way to cover wind / solar intermittency
Consider EC2: you have reserved instances, and then you have autoscaling. If you know the total amount of work is going to predictably rise, you just buy more reserved instances (i.e. build more real power plants.) The non-reserved "elastic" VMs (like the batteries) are just to soak up your highly unpredictable excess load.
Or, think less of a power plant, and more of a capacitor: if a capacitor is way more than is strictly needed to soak up any possible load spike in a system, then we'd say that the system is overengineered, even if a later version of the same system might have enough load to blow that same capacitor. It's "massive" in terms of the predicted load spikes it's facing, not massive in terms of the long-term consumption trend of the system.
This of course assumes average use, which isn't really likely in the case you are protecting against the system being unable to cope, but at the same time it's supplemental to the current system, just as an extra few percent of capacity for an area, not meant to power homes directly or without other sources.
Does it mean Solar City (pending acquisition by Tesla) will speed up building Gigafactory and that's how Tesla will deliver it?
And does it mean that the market was wrong with recent Solar City stock drop?
I'm assuming this is just a "pilot" and, if executed happily, can keep doubling capacity every x months, driving battery prices down, leveraging it as an further advantage over fossil alternatives.
I'm assuming I'm completely wrong because I don't see any spikes in Solar City stock prices?
ps. Bit off-topic but when opening this article I've decided to disable adblock for bloomberg, just because they made bucklescript :P
(That's not necessarily a criticism, just an observation, and one others have made before.)
But isn't it a little crazy how much Elon is betting on 18650 lithium ion batteries.
I really hope I'm mistaken and they have a homemade battery package made up.
I don't understand what risk you're referring to.
They've also done some larger grid storage projects in other countries, and with partners other than Tesla.
I guess it's maybe rational in a self-interested way--no longer do we live in a world of many competing tribes advancing ourselves for our own survival among competition for scarce resources. We live in an increasingly globalized world with a class structure and an overabundance of resources. Or, in other words, "the scarcity problem," as Keynes put it, has pretty much already been solved--at least in terms of survival we have enough resources to feed, cloth, provide shelter and basic healthcare to every person on the planet, but we don't. The answers to that are some of the same reasons.
I forgot how altruistic software engineers, web developers and IT consultants were.
I actually support wealth redistribution, and I even buy in to the concept of diminishing returns in utility to increases in wealth, like you said--though, economists do debate whether that's actually true.
'Bout 50% of the human race is middlemen, and they don't take kindly to being eliminated.
Addressing Peak Energy Demand with the Tesla Powerpack https://www.tesla.com/blog/addressing-peak-energy-demand-tes...
http://www.apexcaes.com/project
-----------
Pumped Hydro is 3GW (Giga-watts): https://en.wikipedia.org/wiki/Bath_County_Pumped_Storage_Sta...
And has a storage capacity of ~10 hours (that's 30GW approximately).
---------
20MW isn't exactly "massive" in the utility scale.
The next really big thing after green energy will be recycling. Not that it matters to our generation.
This has a positive and a negative side: Everything is already there, we just need to implement it, but this does not really encourage you to dream. There is no magic. For me that is part the reason why careers like research or medicine were not attractive to me: You can progress further or save more lifes by just using stuff that has been here for centuries. I believe everybody can make a difference, because we are wasting our potential by not implementing stuff.
I know that this view is oversimplified and there is indeed fundamental research (e.g. new materials), which leads to some of these gradual improvements.
> Whining about it on the internet just makes you seem dismissive.
That was not my intention at all. It was more the child in me that wanted to see flying cars and jetpacks instead of massive adoption of stuff, which has been here for 150 years. I still welcome that it is done.
Yeah man, what a lucky coincidence your cousin can help you saving the planet!
I want alternative energy to work, but it's sobering to see the scale of the problems involved. It doesn't seem to me that laptop batteries scale up so well. If I were forced to place a bet on the future of grid-scale storage, I'd look for something else.
Since the 1980s there has been a significant under-investment in the grid. Since the 1970s there has been a significant under-investment in production. The outcome to that is what you see now.
Good article on the rising blackout phenomenon from 2010:
http://www.cnn.com/2010/TECH/innovation/08/09/smart.grid/ind...
Confusing milli and mega is not very serious for bloomberg..
You could reap some easy efficiency gains by omitting the DC-AC-DC conversion of a solar panel powering a house that charges a laptop.
AC at high voltage can be low current, you can use much smaller wires for a given power.
Irrelevant to the use case under discussion, of course, but someone reading this thread might find HVDC long-range power transmission interesting.
Does anyone know if that would be a viable strategy?
http://www.investopedia.com/terms/m/modigliani-millertheorem...
TLDR: market value is based on earnings power and independent on cost of capital. i don't think the risk of underlying assets change much in this case
Southern California Edison is a subsidiary of a publicly traded energy company.. Where exactly is the subsidy here?
\s
I think it's important to note that they are not "replacing fossil-fuel electricity generation with lithium-ion batteries".
They are putting fossil-fuel supplied electricity into batteries to use at a later date.
(See http://www.vox.com/2016/4/8/11376196/california-grid-expansi...)
This may alleviate that problem
This is a great step forward for getting off oil.
Thermal power stations (oil, coal, gas, nuclear) cannot start up or shutdown quickly so they have to run enough to meet peak demand 24/7. Lots of energy is wasted in the small hours.
http://www.greentechmedia.com/articles/read/californias-duck...
Considering that a single big wind turbine produces 8 MW, this 80 MWh storage facility can only store 5 hours of production from two wind turbines!
And one of those turbines only costs about half of the Tesla storage facility.
That's a funny call, since no one has been tax raided yet.