Tesla caps stellar week with VPP and Home Depot Powerwall deals

It’s been a pretty good week for Tesla CEO Elon Musk. His biggest success was the test launch of the Falcon Heavy rocket system, with which SpaceX put Musk’s own Tesla Roadster into a Mars-bound orbit – a very expensive bit of marketing, but one whose spectacle would be hard to match.

With Tesla, two much smaller announcements added to the momentum that its energy business has been building over the past two years. However, the news was released just ahead of its quarterly results, which showed a record loss of $675.4m, up from Q4 2016’s loss of just $121m. The ongoing complications in the Model 3 production process will be to blame for the rise.

But the energy wing is hoping to turn things around in the near future. In the US, Home Depot announced that it would be carrying both the Powerwall home battery system and the Solar Roof photovoltaic tiles, giving Tesla a big step up in its retail ambitions, thanks to the 800 stores that will carry the systems.

The second Tesla energy success was the news that the state of South Australia has plans to combine 50,000 Powerwall systems in homes to create a Virtual Power Plant (VPP), following on from the record-breaking 100MW grid-scale battery that Tesla installed on a bet – in response to a blackout caused by a tropical storm. Meeting the 100-day deadline on that project has apparently caused supply chain problems for Tesla, however.

In the Home Depot agreement, which will see Tesla staff manning the booths inside the DIY stores, Tesla is hoping that it can use the channel of the largest home improvement retailer in the US to boost its sales – especially on the roofing product, which has been treated with far more skepticism than the Powerwall.

Using in-store demonstrations of the Powerwall’s ability to automatically fire up in response to a detected outage, Tesla will be pitching the system at the millions of US homes that suffer power cuts due to extreme weather events. Other customers will be enticed by its energy-saving capabilities, which (utility support pending) could allow them to store electricity when the variable price is cheaper (often in off-peak times) for use when the price is higher (at peak grid loads).

But Tesla would like customers to buy both a Powerwall and the Solar Roof system that can recharge it. At $5,500, the 13.5kWh Powerwall is not a small investment – especially once you add the cost of a professional installation and the required inverter, which will bring the cost north of $6,000, and likely closer to $6,500. To this end, you won’t be able to walk out of Home Depot with a Powerwall – rather, you’ll essentially be scheduling the installation.

The Solar Roof costs are much more variable, and depend mostly on the size of available roof space. Tesla claims that when used with the Powerwall, the combined system can power a small home for a week, until it needs to access the grid to draw refill the battery entirely. Homes with larger roofs and sunnier climates should be able to last longer.

Tesla is pitching the cost of the roof tiles as equivalent to conventional high-end tiles, but it has been pretty shy about throwing out solid pricing guides. For many, the tiles would be worth an elevated price due to their aesthetic qualities – blending in to a roof in such a fashion that you’d have a hard time identifying their energy producing properties. For those concerned with pure electricity output for the sake of cutting bills, they might find that a conventional PV panel has a much faster return-on-investment.

And speaking of prices; in most markets, there’s a solid business case for battery storage, where markets have variable pricing schemes. But some electricity market prices are distorted by an abundance of cheaper renewable sources like wind and hydro – meaning that storage won’t stack up for some home owners, compared to what they might expect in other areas. To this end, utilities have been looking at ways of adding storage capacity to their electricity grids, so that they can accommodate the variable generation capacity of these renewable assets.

Home storage like the Powerwall is a good option for these utilities, and it seems likely that rebates or price incentives will be used to encourage adoption. Storage would be one avenue for them to explore, and likely done in combination with Demand Response (DR) to allow the utility to dynamically alter a home’s demand for electricity – delaying an appliance from turning on, or lowering the power draw of a HVAC system, for example.

But Tesla is far from the only player in the home battery game. Sonnen and LG Chem have their own units, the sonnenBatterie and RESU respectively, and in the automotive world, Daimler, Nissan, and Audi are all exploring launches – largely as expansions of the EV offerings. Smaller companies like Powervault, Orison, and ElectrIQ Power, are all pushing their solutions too, hoping to solve the HEMS battery problem.

As for the South Australian news, Tesla looks to have notched up a sweet contract with the state, on the back of its success with the 100MW grid-scale unit. President Jay Weatherill said initial phases of the deployment were underway, and that it could scale to 50,000 homes – which would make it the largest VPP in the world.

“Our energy plan means that we are leading the world in renewable energy, and now we are making it easier for more homes to become self-sufficient. We will use the people’s homes as a way to generate electricity for the South Australian grid, with participating households benefiting with significant savings in their energy bills,” added Weatherill.

Work has already begun on adding 5kW solar panels and Powerwalls to 1,100 public housing properties, and there is a roadmap to add another 24,000 homes. Pending the success of this first stage, the project could be brought to 50,000 homes within four years.

Funding is coming from an Australian central government fund, intended to boost renewable energy. In addition, electricity generated by the solar panels will be sold on the electricity markets, to earn the state additional revenue. Crucially, the current tenants are not being charged for any of the installation, but it is not clear how this will affect their energy bills.

This would be a rather swift way for a government, county, or city to set up its own utility, especially if it owns enough roof real-estate to generate a sizeable amount of electricity. However, this will not make it popular with the local utilities, as the new entrant would be piggybacking on the rather expensive distribution infrastructure that the utilities have collectively invested in.