How will home storage affect renewable energy?

What is the significance of the Tesla Powerwall storage appliance and what does it mean for the future of energy and Tesla?  Travis Hoium covered a great deal in this Motley Fool article.  He points out that at today’s electricity prices the Powerwall is a boutique product.  It is not economical.  If you want backup, a generator is much less expensive.  In fact, the only justification for battery backup of this kind today is for niche markets with very high electric rates (such as Hawaii) and for commercial entities to reduce demand charges.  But Tesla introduced a battery backup solution for demand charges almost 2 years ago.  So what is Elon Musk up to?

There are 4 reasons for the PowerWall:

1) Market creation: The renewable energy buzz is strong right now.  For years, solar energy has been a niche market and the mainstream has been mildly curious about it.  Low prices, residential PPAs and great marketing by companies such as Solar City has mainstreamed solar.  Now the question in the public’s mind is “what about night time”.  Just as the Supercharger network solves a non-problem (at least for the vast majority of EV owners), Powerwall solves what is currently a non-problem for the renewables industry.  It is a product that manages public perception.  Musk doesn’t advertise but everything he does is marketing.  And powerwall is about marketing and technology development.

2) Technology Development Targeting Future Markets:  In electric cars the progression of products has been cleverly designed for Tesla to learn / create the technology for mass market products.  In storage they are following a similar road-map.  Tesla makes no secret of its auto road map.  The Roadster targeted a tiny boutique market of cool in order to develop a technology baseline for future plans.  The Model S was designed to teach the company how to mass produce cars in moderate volume.  The Model 3, due for release in 2017 is targeted at high rates of production and the mainstream.  Think of Powerwall as Tesla’s model S for their storage business.  The Powerwall equivalent of the model C will develop as battery prices are driven down by volume in the EV industry.

3) To Drive Grid Storage Policy Development:  With an operational real world example of the technology in the marketplace, policy makers have something tangible to give policy development traction and reduce their risk.

4) A Test Market Exists to Act as a Laboratory:  California’s Grid Energy Storage mandate pretty much assures a market of sufficient size that Tesla can do a real world test of Powerwall.  In other words, they can do a large pilot test without incurring significant, possibly any, losses.

What does it mean?  This is analogous to the introduction of the MacIntosh computer in the 1980’s.  The early Macs had questionable economics.  For the $2500 price tag you could buy a lot of hours paying someone to type and even do graphic layups of documents.  But most recognized immediately that the MacIntosh represented the template of the future.  While its economics were questionable initially, the passionate niche of early adopters assured that the paradigm shift took hold and offered the niche market needed to drive the technology to maturation.

Powerwall is not a technology breakthrough.  It is revolutionary only in its timing, who is doing it and the fact that Musk and company offers the leadership and credibility to disrupt the energy industry and lead us down a path to clean distributed energy.

This article is published in collaboration with The Energy Collective. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Clayton Handleman is a physicist, engineer and entrepreneur.

Image: An electric vehicle is plugged into a charging station. REUTERS/Mark Blinch.