Storage Market Overview
Energy storage was categorized into two broad groups: (1) front-of-the-meter, utility-scale technology and (2) behind-the-meter (BTM), customer-sited, distributed technology. Front-of-the-meter technology fell within a utility’s control and has historically included technologies such as pumped hydro and thermal energy storage. These front-of-the-meter sources made up a preponderance of overall storage adoption within the United States. In the first quarter of 2015, of the 5.8 MW of storage deployed in the United States, 4.2 MW were comprised of six front-of-the-meter systems.○
BTM storage was typically lower-capacity technology distributed across homes and businesses, and could be owned and controlled by end users rather than grid operators. Although still a small component of the overall storage market, BTM systems were being deployed at a growing rate. In 2014, BTM storage deployments more than tripled from 2.1 MW to 6.4 MW.○
“The technology is fairly new, and it might be challenging for utilities…”— Brett Simon, Energy Storage Analyst, Greentech Media
The Powerwall Home Battery
Elon Musk announced the Tesla Powerwall Home Battery on April 30, 2015, to much fanfare. The Powerwall adapted Tesla’s automotive battery technology to power residential homes with a BTM storage system. It was designed to hang on a wall, integrate with the existing grid, and provide four to six hours of generation at maximum output. Each Powerwall came with 6.4 kWh energy storage capacity, 2.0 kW of continuous power, and 3.3 kW peak power availability.○
Tesla differentiated the Powerwall from other battery systems which it described as “bulky, expensive to install and expensive to maintain.” ○ In contrast, the Powerwall was cited by Tesla as easy to install and requires no maintenance.
Value Proposition: Residential Customers
Tesla cited three major services that the Powerwall could provide for residential customers:○
- Increase solar self-consumption: The Powerwall could store surplus solar energy not used at the time it is generated and use that energy later when the sun was not shining.
- Load shifting: The battery could provide financial savings to its owner by charging during low rate periods when demand for electricity was lower and discharging during more expensive rate periods when electricity demand was higher.
- Emergency backup: Assured power in the event of an outage.
While these three services provided an overview of the benefits that grid-connected customers around the United States could potentially enjoy with the Powerwall, Castonguay knew that he would have to use a more nuanced approach to determine and communicate the value that the Powerwall could provide a GMP customer. After all, grid-connected customers around the United States—and even within GMP’s service territory—faced differing electric rate structures, power outage patterns, and personal values concerning the adoption of new technology.
Tesla’s proud claim that the Powerwall was one of the most affordable options on the market was, however, a shaky statement. At a $3,000 wholesale price and an additional $3,000–$3,500 cost for an inverter and installation, the Powerwall’s price came out to about $6,500 to the end customer. Comparable fossil fuel generators that customers might otherwise use for backup power ranged in price according to maximum power, but could be estimated at about $2,000.○ Comparing these prices, Castonguay knew that backup power alone would not build a strong economic case for the Powerwall. However, a GMP customer who cared about backup power and valued the “early adopter” appeal of the Powerwall might feel much more inclined to opt for Tesla’s product over a generator.
Castonguay hoped that GMP could strengthen the economic value of the Powerwall by providing financing options that would lower the up-front cost of the system. He figured that this could be used as a strong incentive for Powerwall customers to share some level of operational control with GMP, which would allow GMP to leverage the Powerwalls for grid benefits.
Forecast: Customer Interest
Early focus groups and surveys indicated that GMP could rely on an estimated 0.5% of its residential customer base to sign up for the program as an early pilot. However, Castonguay was still deciding what the right size for such a pilot would be. Based on this customer data, early adopters could be broken into 3 main groups:
- About 15% wanted to buy the Powerwall outright and maintain sole, continuous access.
- Approximately 45% wanted to buy the Powerwall but were open to giving GMP some level of control in exchange for compensation.
- Near 40% would preferred to enter a leasing agreement in order to avoid the up-front cost of buying the Powerwall. These customers largely viewed sharing access as acceptable in exchange for compensation.
Castonguay would have to emphasize to Powell that this forecast was based on a small sample size. If GMP were to offer multiple ownership and control options to customers, there was a chance that fewer customers would cede control than GMP needed in order to generate significant operational cost savings. However, this path would align well with GMP’s credo of prioritizing customer satisfaction by offering customizable choices. Castonguay would have to find a way to balance the value the Powerwall could provide individual customers with that it could create for Green Mountain Power’s grid operations and economic bottom line.