Has Elon Musk discovered renewable energy’s Holy Grail? He’s already reinvented financial transactions for the Internet age with PayPal and made electric vehicles sexy with Tesla Motors. Now he’s aiming to bring his infectious energy into our homes—literally—with residential-scale Powerwall battery packs manufactured by Tesla Energy, a Tesla Motors subsidiary. His April announcement about the new line has caught the attention of energy-industry experts bullish on the broader market for battery-based energy storage—though the technology continues to raise questions for engineers and energy regulators alike.

Power to the people


In the crusade to create dependable and dispatchable electricity from clean, yet intermittent, solar and wind installations, affordable energy storage has long been called the Holy Grail. So when Musk made his new-product announcement at Tesla’s design studio in Hawthorne, Calif., it garnered significant coverage in both mainstream and energy-industry media outlets. Some of the company’s specific, short-term cost and benefit claims can seem a tad hyperbolic on close examination, but there are reasons for taking Tesla Energy’s broader ambitions seriously.


For one thing, Musk is known for thinking—and talking—big. Soon after selling his founders’ stake in PayPal, he started the rocket-technology company, SpaceX, with a long-term goal to support a “true spacefaring civilization.” Now, the company is a major rocket- and satellite-launching vendor for NASA. Investors seem to appreciate his game-changing challenges to conventional wisdom—Tesla Motors shares were trading just shy of $260 each, as of press time—even though the company has yet to turn a profit. Energy enthusiasts and financiers were both ripe audiences for his true-to-form prediction that the new batteries he was announcing would create “a fundamental transformation of how the world works.”


Critics were quick with their “yes, but” editorials and point-by-point rebuttals to Musk’s remarks and deservedly so in some cases. For one thing, the heavily hyped $3,500 price tag for a 10-kilowatt-hour residential Powerwall unit is, essentially, the wholesale cost to a distributor or contractor—inverters and installation could easily double that cost. There were also claims the system could provide backup electricity to a house in the case of a grid outage. However, while the capacity of a single unit could keep dedicated furnace and refrigerator circuits powered for some time, it would hardly keep a household of flat screen TVs and video game systems up and running.


Those caveats aside, there’s no doubt that battery-based energy storage has begun turning the corner. Navigant Research reported in February that, globally, 696.7 megawatts (MW) of energy-storage projects were announced from the third quarter of 2014 to the first quarter of 2015. Lithium-ion batteries—the type Tesla Energy will be marketing—accounted for 80 percent of those projects. Tesla’s 5-million-square-foot battery-­manufacturing plant, dubbed the “Gigafactory,” is anticipated to produce up to 50 gigawatt-hours per year of battery-pack capacity. While marketing material on this enormous factory is focused strictly on batteries for Tesla vehicles, developing residential, commercial and utility energy-storage markets can only help build economies of scale that should, theoretically, drive down costs across all sectors.


Utilities are taking note. Vermont-based Green Mountain Power (GMP), the state’s largest utility with approximately 250,000 customers, will be receiving 500 Powerwall units in November. This represents a small fraction of the 38,000 preorders Tesla Energy is said to already have received, but it’s the first major utility purchase, which makes it significant. Even more interesting, the utility will offer discounts or other incentives to customers willing to allow GMP to draw on their batteries’ capacity to help relieve peak-demand stress.


The grid is getting smarter.


“We’ve been talking with Tesla for two to three years,” said Josh Castonguay, GMP’s director of generation and renewable innovation, who added that the exact go-to-market details were still being ironed out. “Our plan is to offer it to customers—it could be a lease or a sale—but the customers [would] allow us to have use of the systems during certain times of the year.”


Unique testing ground


Unlike every other New England state, as well as neighboring New York, ­Vermont’s electric utility market is fully regulated, so GMP owns the generation it uses to supply electricity to its distribution customers. Because of the relatively high penetration of rooftop solar photovoltaic (PV) panels in its service territory, GMP sees its peak-demand periods shifting later, as solar production declines just as customers return home and start turning up their air conditioners. It would be during those times—possibly 15 to 20 times per year, Castonguay estimates—that the company’s customers would become its peak-demand suppliers, reducing its need to fire up expensive and inefficient peaking-power generators.


The initial 500-unit order was based on a recognized need to add approximately one megawatt of peak generation capacity. GMP’s customers who purchase or lease the devices likely will get a break on the total system cost and, potentially, the opportunity for $0-down financing similar to the utility’s current incentives for heat pumps and other equipment. Savings garnered from tapping the batteries­ (instead of more expensive central generation) will pay for the discounts and other benefits offered to battery users. It’s an arrangement Castonguay sees as a total win-win for the utility and all of its customers—not just those with batteries in their basements or garages.


“Something like this just gives us huge flexibility,” he said, emphasizing the batteries’ potential to provide voltage regulation and other services in the future. “The value we have today might be a totally different value five years from now.”


Standards playing catch-up


For GMP’s customers, being able to use their batteries as an actual on-site resource in the case of distribution-system outage is an advantage other buyers might not be seeing for several years. Individual homeowners in other areas likely will run into interference from their local electric utility should they decide they want the same protection. As is the case with almost all rooftop PV systems, their utility likely will want to shut the batteries down in an outage situation to prevent the batteries’ power from feeding back into the grid and injuring lineworkers working with what they think are dead lines.


Such operation is governed by the industry standard that has been a primary enabler of rooftop PV’s enormous success over the last decade. The Institute of Electrical and Electronics Engineers’ Standard 1547, “Standard for Interconnecting Distributed Resources with Electric Power Systems,” was approved in 2003. It outlines performance requirements for inverters and other connection equipment, and, with the accompanying IEEE 1547.1 equipment-testing standard, provides assurance to utilities and local code officials that installed systems would be safe for both workers and the connected grid.


To ensure that safety, IEEE 1547’s 2003 version required distributed energy resources (DERs) to disconnect immediately after any recognized frequency or voltage irregularity, no matter how small. This is why Powerwall purchasers outside Vermont might not be able to enjoy the energy security Musk promised in his roll-out speech. However, the next few years could see rapid changes. The standard’s developers recognize there are opportunities to make greater use of DERs, all while maintaining safe connections.


One such developer is Thomas Basso, a senior engineer at the U. S. Energy Department’s National Renewable Energy Laboratory and chair of the IEEE working group now overseeing a full revision of IEEE 1547. From his viewpoint, the standard’s success has been a boon to equipment innovators.


“From a technical perspective, it spurred a lot of people on to do a lot more R&D,” he said, adding that this enables more sophisticated operation than the simple on/off required under the standard’s original incarnation. At the residential level, he said, smart inverters are gaining the ability to act autonomously, while some larger systems already have the ability to be controlled by signals from the connected utility or other third-party operators.


The IEEE 1547 working group took a half-step toward greater participation of energy storage, PV and other DERs in utility distribution systems with a 2014 amendment to the standard, which allows for “ride-through” during some short-term voltage and frequency irregularities. Such operation can be very helpful to grid operators, especially in areas with heavy PV penetration. Keeping PV and storage systems connected and feeding into the grid during brief voltage sags, for example, could prevent a minor glitch from turning into a major headache.


Basso anticipates that the fully revised 1547, with a planned release date of 2018, will emphasize such voltage-regulation features.


“That was always a bone of contention with forward-thinking types,” he said, adding that current conversations are considering whether ride-through and other advanced capabilities should actually be mandatory for interconnection equipment.


As communications increase between utilities and their customers’ DERs, on-site batteries could play a special role.


“Energy storage is unique in that it’s both a load and a ­generator—increasing loads also helps support the grid,” Basso said. 


Imagine times when, for example, a distribution circuit sees more incoming PV-generated electricity than it’s designed to handle. 


“You don’t only want the energy-storage device to kick in when you’re disconnected from the grid,” he said.


Holy Grail on the horizon


While promoters of on-site energy storage might be a tad ahead of the curve in their sales pitches, it seems their Holy Grail promises might become a reality within the next few years. GMP’s Castonguay sees a near-term future in which such resources as energy storage and rooftop PV will enable utilities to treat the grid less like a one-way pipeline and, “more like a data network.” Basso has been active in distributed generation standards development for decades and is particularly energized by the creativity he sees in up-and-coming technology innovators.


“I think it’s a real exciting time now,” he said. “The really sharp graduates, they’re really pushing the envelope. It’s a good time to be in the electrical utility world.”