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So this is only financially viable because of Californian risk aversion after last years gas leak. If you have a reliable natural gas distribution network, like the rest of the world, batteries don't make any financial sense versus gas power plants.

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.

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Why are people comparing and debating "batteries vs combustion turbines"? Batteries only store energy and you still need to generate it somewhere. Probably from a CCGT plant.

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.

People are comparing them because they serve the same purpose here.

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.

Or you can use PHS: https://en.wikipedia.org/wiki/Pumped-storage_hydroelectricit...

You can't build and install pumped hydro in 3 months.

Wasn't Danielle Fong and folks doing pumped (and cooled) air for this? I wonder if that's still around and if maybe they lost this bid.

we didn't bid. we're still around though. we have plans :)

it will be interesting to see how Tesla makes money. it's probably mainly a test site.

Yes I know how all that works becuase I worked in the utility industry for over a decade.

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.

People neglect the cost of off-peak generation because it's much cheaper than the other two parts of the equation.

It's still a cost driven thing. They could be emergency-buying or emergency-relocating gas infrastructure over the next few months.

Off-peak generation is really cheap, though. It doesn't affect the equation that much. In some places (I'm sure SoCal isn't one of them) it's cheaper than free sometimes.

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.

Energy density of gas (at conventional pressure) is 100x lower than that of a charged battery. Storing gas instead of electricity might not be such a good option.

Otoh, a gas tank requires only O(E^(2/3)) material, while a battery requires O(E) material, where E = stored energy.

I'd encourage you to spend 15 minutes researching what the costs are of running a peaker plant. There's a reason they're the most expensive generation method per MWh (peakers run for under 100 hours per year).

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.

Sure peakers are expensive, but they are profitable, otherwise no-one would build and run them. Supply and demand etc.

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.

Batteries are now cheaper than peakers everywhere, not just CA. That's what I'm saying.

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.

Tesla is not producing peakers, correct?

Tesla is producing battery storage, which is either a peaker plant or backup for failed transmission lines, take your pick.

Could you share a reference for "Batteries are now cheaper than peakers everywhere"

Bookmarked to come back to show my math in the morning.

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.

>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".

That's entirely fair, but then we should also include the full costs of peak power, including all the externalities due to emissions and such that the utilities don't currently have to pay for.

The cost of batteries is falling at a current rate of 16% per year and it's accelerating. As such, battery storage will become increasingly competitive with peaker plants.

"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...

btw, the price recently dropped on powerpack by 5% and 19% on inverters.

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...

As you can see in the graphs I linked in upstream comment, in the UK alone, CCGT power plants have a capacity of 20 GW. That's 1000x this battery plant; meaning a $20 billion capital investment. And I don't see any way that Tesla (or anyone else) has the manufacturing capability to deliver that. Remember this is just for the UK, so for the US and Europe in total you're talking at least 10 000 plants like this.

Not all gas generators are peaker plants. Gas is displacing coal for what is often termed "baseload" (though I don't like the framing implied by the term).

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.

I thought about this some more, and I realised, Tesla and other EV manufacturers better be praying that this is not a financially viable replacement for gas turbine peakers in general.

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.

I recall reading quite a while ago that Tesla said that they see themselves primarily as an energy company. Looking for a citation...

The batteries used for cars are different to the batteries used for power banks.

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.

Musk has stated publically that they're betting the company on the battery price coming down for the Model 3 to be profitable. That's why they're building the Gigafactory, to reach $100/kWh. If suddenly power companies start buying lots of batteries, and prices stabilise at or above today's levels, it would mean (by implication) that the Model 3 won't be profitable (at least initially).

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.

If prices don't come down, especially due to higher demand, and the car isn't profitable then the battery factory will be instead. Sounds like they win either way.

If this really ends up being the case they can just slow the model 3 deliveries to a trickle-- All those pre-orders are really just an interest free loan with fungible time tables on actual delivery, and the "financing terms" only get better for Tesla the longer they kick the can down the road.

(What is the net present value of $1000 in 2020? 2025?)

18650 is a packaging size. The internals can vary.

Tesla seems to be making the opposite gamble - that the grid-attached storage market will give the large-battery market economies of scale and help the EV market (and the other way around). They're building a very-large-scale battery factory, and probably cannot utilize it fully just on building their own cars.

Even if massive demand for batteries driven by grid storage makes EVs uneconomical, Tesla is setting themselves up to build and sell the batteries, so they win either way. (Well, aside from their goal of having the entire planet transition to EVs. They win financially.)

That would only be a problem in the short term - if that. In the long term, if the demand is as high as you say (hundreds of GWh per year), then you'll see Tesla, Panasonic, Samsung, LG, Bosch, and whoever else is making batteries step all over themselves to build new mines or mining capacity and more battery pack factories like the Gigafactory.

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.

Extra demand for that giga-battery factory Tesla is building? What a dreadful problem that is(?!)

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)

Peakers are still much cheaper than batteries. Here's the most recent analysis from Lazard: https://www.lazard.com/media/2391/lazards-levelized-cost-of-... See p. 9.

So current peakers will not be stranded assets, especially because the life of batteries is likely less than 20 years.

holy cow that is an amazing pdf file! Or maybe I just especially like it bc it's exactly what I've been looking for in the last few weeks.

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

Since they're not technically a "plant" - just storage - is there any advantage to be had to build in many smaller (say per-neighborhood) battery plants? Seems like they could act not only as peak providers, but also battery backup in the case of storms and whatnot. Plus it reduces a single-point of failure.

I ask for I am uneducated in this area.

Yes to both your suggestions. It also would stave off transmission line upgrades.

Peakers are profitable precisely because the supply is close to non-existent at peak consumption. What batteries are doing is "moving" excess supply from one moment to deal with excess demand at other.

Peakers aren't "profitable" per se, they're a result of the government granted monopoly given to power utilities. In california, at least, a brown or blackout caused by insufficient capacity can cost the utilities tens or hundreds of millions in fines so the peaker plants are a relatively cheap way to avoid having your margin wiped out in the summer. That said, I'm not sure 20MWh would really help replace any peakers although in the future they definitely will.

80 MWh. 20 MW.

That's because a blackout costs the customers the same tens or hundreds of millions.

> Sure peakers are expensive, but they are profitable, otherwise no-one would build and run them.

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.

>> "...but they are profitable..."

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.

>There is no scenario where the cost curve per kWh of battery storage goes up.

Lithium shortage.

Lithium is a common element. The difficulty is always that it is rather even distributed making it expensive to concentrate. It's the kind of thing that is solved simply by scaling up. It is in fact more abundant in the Earth's crust (17ppm) than lead (10ppm) and according to Wikipedia <https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth... 2012 production of lead was 5.2MT while lithium was 37kT.

Abundance in Earth's crust doesn't help at all during a supply crunch. Bringing a mine up takes at least 5 years. And your mine is going to be on an orebody, not just processing random rocks. Cobalt is another critical element for batteries I believe.

Lithium is "mined" by pumping underwater brine to a surface pool and letting it evaporate. The cost effectiveness of this apparently caused most Lithium mines to shut down inthe 90's because they couldn't compete[1]. Lithium is also present in seawater, but they apparently don't have a cost effective way to extract it from that yet. Apparently the evaporation process is 18-24 months per batch though, so there is some lead time, just not 5 years (good), and it doesn't necessarily lesson by all that much if you have the facility already set up (as in you can't necessarily throw more people/machines at it for a short term increase, which is bad).

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.

1: https://en.wikipedia.org/wiki/Lithium#History

>The difficulty is always that it is rather even distributed making it expensive to concentrate.

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.

Ramping up recycling of old batteries helps

Lithium isn't always required.

https://en.wikipedia.org/wiki/Flow_battery

http://www.renewableenergyworld.com/articles/2015/08/hecate-...

Just to inform the discussion wrt. timescales and magnitudes of power variability, here is a real-time plot of power generation in the UK showing daily/weekly/monthly variations in consumption and in production from nuclear, coal, gas turbines, wind, bio and (pumped) hydroelectric. This is with zero battery storage on the grid (I believe).

http://www.gridwatch.templar.co.uk

Pumped and normal hydroelectric are split on this.

<3 Dinorwig. The tour there is pretty cool if you get the opportunity.

> "If you have a reliable natural gas distribution network, like the rest of the world, batteries don't make any financial sense versus gas power plants."

"The rest of the world" also has measurably more expensive gas. ($10/mmBTU for large scale users around here).

> If you have a reliable natural gas distribution network, like the rest of the world, batteries don't make any financial sense versus gas power plants.

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.

I wouldn't say it's one time. There are many islands (like Hawaii) that have to import diesel to run their generators, which is very expensive. Replacing diesel generation with renewables + storage will be very attractive for a long time.

Gas power plants and batteries have different timescales. Grids with a lot of renewable energy need a slice of capacity that can ramp up faster than a gas turbine.

"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.

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