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How Tesla will help bring renewable energy to your business or home

Lucas Mearian | Aug. 21, 2014
The national power grid could someday become the backup to custom solar systems for businesses and homes.

As battery technology evolves, it could pave the way to cost effectively store both wind and solar-generated energy and connect into electrical power grids. The technology also could used by businesses and homes, which could virtually remain off the grid except in emergencies.

Mass production will drive down the price through economies of scale, Fishman said. A battery backup system for a house would be about the size of a refrigerator and would cost about $3,000.

"That's a good cost," he said. "That's something I could see happening in solar systems across systems."

Economies of scale
Tesla plans on producing an electric vehicle for the "mass market," called the Model 3 sedan, in about three years, leveraging its and other manufacturers' demand for lithium-ion batteries in the process.

But the availability of less expensive electrical storage could also fuel the growth of utility and business-grade solar farms, which act like a conventional power plant by feeding electricity to the grid, and providing power at night as well.

Even consumers could benefit from inexpensive batteries that could store the average 35 kilowatts of power needed each day for a home to operate lights, appliances and other needs.

Fishman said that without adequate reserve power storage, solar systems face an uphill adoption battle because of their inability to supply power when the sun is down or covered by inclement weather.

"With cost reductions from the Gigafactory& , we may see lower-cost batteries trickle down to the [solar power] storage industry and see storage devices through SolarCity start to offer energy storage systems alongside their solar systems. In that case, a house could potentially be 100% off the grid," Fishman said. SolarCity is one of the largest solar power companies in the U.S.

A complete solar system with battery backup will likely sell for about $1.30 per watt by 2020, according to Fishman.

Today, solar systems for homes or businesses sell for around $2.5 per watt. A typical house needs a 6 to 7 kilowatt solar system, meaning installation costs more than $15,000. In other countries, such as China, the systems sell for as little as $1.15 per watt.

Panasonic has signed a deal with Tesla Motors to help build the Gigafactory, which it hopes will produce half a million electric-vehicle batteries per year.

The overall cost of constructing a utility-scale solar project came down 56% from 2010 to 2014 and now stands at $1.85 per watt on average, according to GTM research.

A look at the average power purchase agreement (PPA) price shows an average electricity price of 8 cents per kWh, down almost 40% since 2010, according to GTM.

By comparison, coal-fired electricity costs about 5 cents per kWh, "so solar is not cost competitive yet," Fishman said. "But if trends continue, it will be cost competitive."

 

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