The Powerwall Will Expand the Market for Residential Backup Power

Residential backup batteries store power, either from the utility or from solar panels, to be used when utility power is unavailable. The Tesla Energy 10-kilowatt-hour (kWh) Powerwall battery, which is designed to be discharged weekly, is a good choice for this application. Tesla sells the battery for $3,500, but SolarCity offers it installed retail—including inverter—for $7,140.

How Tesla recommends the Powerwall be installed

The market for residential backup power isn’t huge, but it’s big enough to interest Tesla, which excels at marketing products to early adopters. According to the Wall Street Journal article A Sales Surge for Generator Maker, in 2012, about 2.5 percent of US homes had backup generators. At the time, this market was growing rapidly in the aftermath of Hurricane Sandy, so it’s likely bigger today. The dominant product line in this market is a variety of small natural gas generators manufactured by Generac, a 50-year-old company with a solid record of innovating in this sector. The 16-kW Generac generator available from Home Depot is priced similarly to the Powerwall. It sells retail for about $3,700, but installation adds a few thousand dollars. At first glance, the Generac product has quite a few advantages over the Powerwall.

For one, the generator provides much more power. When the Powerwall was originally introduced, it was specified to exhibit 2 kW of power, but Tesla Motors CEO Elon Musk announced that it had been boosted to 5 kW. Even at the higher level, the Powerwall provides less than a third of the power that the generator does. That difference in power is associated with far more convenience. In a home powered by the generator, occupants can pretty much use any electrical device they choose, whenever they want. They can run the air conditioner, blow-dry their hair, use the microwave, and turn up the volume on their large-screen TV. Powerwall users have to be much more careful. No simultaneous air conditioning, hair drying, microwaving, and TV watching for them.

Secondly, the generator can supply far more energy than the Powerwall. At full power, the Powerwall can energize a home for two hours. The generator can operate indefinitely, as long as it’s in good working order and has a natural gas supply.

Despite these two advantages, I can see lots of people choosing the Powerwall over the generator. The battery is quieter. It’s also more reliable. Maintaining a generator takes a lot of time and diligence. Few homeowners have the time or patience for it. If small generators aren’t rigorously tested and maintained, when the big catastrophe occurs and the grid goes down, there’s a good chance they won’t immediately start humming away. With no moving parts, the Powerwall is far more likely to be functional in an emergency.

The Powerwall is certainly more attractive than the Generac. More than that, the Tesla name carries cachet. After dinner parties, Powerwall owners can take their guests and their cognacs downstairs and show off their battery. They’re much less likely to take their guests out into the backyard to show them their generator. Lastly, for those homeowners with both solar panels and a backup battery, during a grid emergency, when all their neighbors’ homes are dark, they can light up their own home using solar electricity generated by their own panels, at least for a few hours. How cool is that?

The Tesla Powerwall offers simplicity, quietude, and prestige. I anticipate many people will find those attributes compelling enough to overlook the energy and power advantages of generators. Although backup batteries are certainly not going to become as ubiquitous as toasters, I do expect Tesla to become a major competitor in this sector. Even more so, I expect the company will expand this market.

This is the third installment in a five-part blog series that examines four applications for Tesla’s batteries. Part two of the series talks about how the batteries can be used in time-of-use arbitrage. Part four speaks to how the Powerwall product can be used for demand-charge management. And the final installment addresses how the batteries can be used for grid-scale storage. If you’d like to share your opinions on any of these topics, please leave a comment below or send us an email.