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Innovation comes at a cost. One of the hopes in energy innovation is that there will eventually be a financial benefit. The Tesla battery is no different.

When you watch Elon Musk present the Powerwall Did Elon Musk Just Save Us From Fossil Fuels? Did Elon Musk Just Save Us From Fossil Fuels? Read More , you’ll find that he focuses on the environmental benefits for all of us. That’s great. He does also talk a bit about how it could save you money. But how much money will it really save you?

That’s our focus today. Let’s look at the numbers to see if it will save you money and how long until it could pay for itself. This will take us on a journey into a little math. Don’t worry, the math will be done for you. We’re mostly going to look at what the numbers mean.

How Will a Tesla Powerwall Save Me Money?

The idea that Musk puts forth is that the Powerwall will charge up during hours of the day when most people are using less electricity. This is known as non-peak hours. During those hours, electricity is cheaper to buy. Those hours when most people are using lots of electricity are peak hours. Peak-hour electricity is more expensive.

percent daily kwh hour summer winter

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It’s a real-world example of the economic principle of supply versus demand that applies to many, but not all, commodities. When the demand is low and the supply is high, things get cheaper. Of course, when demand is high and the supply is low, things get more expensive.

So if you’re buying electricity at a lower price, storing it in the Powerwall, and then using it when electricity is more expensive, you’re saving money, right? We’ll see.

It’s important to note that to make use of time of use (TOU) pricing, your home needs to have a smart meter installed.

Smart Meter

Normally, your electricity provider pays for this, so it won’t cost you out of pocket. If you cannot get a smart meter in your area, it might be time to look at going solar 6 Advantages of Solar Panels You Probably Haven't Considered 6 Advantages of Solar Panels You Probably Haven't Considered Solar power is becoming increasingly common among middle class consumers, with more and more people realizing the advantages of solar panels. Read More .

How Can I Figure Out If a Tesla Powerwall Will Save Me Money?

Figuring out how an investment like this will save you money may seem simple. But it’s not. Your situation may be completely different than anyone else. Where you live, number of people in your house, what appliances you have…those are just a few of the many variables. So let’s pick one situation and work with that. Adjust the calculations for your situation.

Let’s look at an an average house.  Really, there is no average house, so let’s go with the same one we used in The Oil Killers: When Google’s Data Meets Tesla’s Visions and MIT’s Brains. We’re also going to treat the home as not already having a smart meter installed.

Subject House Streetview

This 1,600 sq.ft. home uses about 7,400 kilowatt hours per year (kWh/yr). It’s in a four-season area with the kind of summers and winters you’d expect in the northeastern US. Last year, the cost of electricity averaged about 15 cents/kWh. Therefore, the yearly bill was $1,110.

7,400 kWh/yr x $0.15/kWh = $1,110/yr

That’s the number to beat. Installing the Powerwall will have to lower that number in a reasonable amount of time. Otherwise, is it worth it?

The next thing we need to look at is the capital expenditure. That is, how much you have to spend to get the system into place. An easy calculation, right? How much does a Powerwall cost?

Cost to Install the Powerwall

Obviously, you’ve got to buy the Powerwall. Currently, it’s listed at $3,000 each for the 7kWh model. This home uses an average of 20 kWh per day.

7,400 kWh ÷ 365 days = 20 kWh/day

Let’s assume that during the peak hours we’ll use about half of that. That’s 10 kWh. So you’ll need at least 2 Powerwalls for 14 kWh. That should cover the peak hours of the day. There’s $6,000 spent.

Tesla Powerwall

You’ll also need a AC-DC inverter. Batteries work on direct current (DC), North America’s power grid is alternating current (AC). For the two of them to work together, you need the inverter. DC goes in one side, AC comes out the other, and vice versa. It also needs to be a grid tie-in inverter.

It has to be a grid tie-in inverter to prevent it putting electricity back into the grid. Why? Picture a power outage near your home. A power line technician comes to fix it, thinking there’s no electricity there. But your Powerwall has electricity and is feeding it out to the grid. That’s how it works. If it doesn’t have power coming in, it’s putting it’s power out. It may go right out of your house and into the power lines. He’s in for a nasty, possibly life threatening, surprise. So your power provider will require the grid-tie-in inverter.

The inverter needed for a Powerwall is about $2,000. Because it isn’t a plug-and-go installation, you’ll require a licensed electrician to install it.

MagnaSine Grid Tie In Inverter Charger

There are far too many variables to know exactly what installation will cost. Let’s keep it simple at 6 hours to install and say the electrician charges $50/hour. Let’s also pretend that the electrician needs no extra parts. So, that’s another $300. Expect to pay more though.

$6,000 for Powerwalls + $2,000 for Inverter + $300 for Electrician = $8,300

$8,300 – that’s the number to beat. Now you need to figure out how much it will save you and contrast that with what you’ve invested. That will tell you if it will save you money. If so, how much and how long it will take to pay for itself?

How Much Do I Spend on Electricity Now?

First, you need to know how much you are spending on electricity now. That should be fairly easy to figure out. The power company lets you know frequently in the form of a bill. If possible, gather the last 12 months worth of bills. The power bill should show you a few key things. You’ll need to write these down:

  • The amount of power you use each month. This is in kilowatt-hours (kWh)
  • The cost per kWh for each month.
  • The total cost for that electricity – but only the energy charges!

The rest of the bill is service charges, taxes 6 Best Free Tax Software to File Your Next Return 6 Best Free Tax Software to File Your Next Return If you're tired of paying to file your taxes, you'll love these six free options for filing your state and federal forms. Read More , and goodness knows what. Having a Powerwall isn’t going to change those.

Using a spreadsheet here would make your life a bit easier. If you’ve never done so before, this is a good chance to learn to use spreadsheets Make a Personal Budget on Excel in 4 Easy Steps Make a Personal Budget on Excel in 4 Easy Steps Read More . Once you learn to use them, you’ll be hooked.

Your spreadsheet will look something like this:

Current Energy Charges

Next you need to compare that to what you’ll expect to spend for electricity in the future, now that you have the Powerwall. This is a bit more difficult to calculate.

How Much Will I Spend With Time Of Use Charges?

The trick here is knowing what the time of use (TOU) cost of electricity will be in your area.

For our purposes, the best we can do is estimate. For this article, we’ll use data from Ontario Energy Board (OEB), of Ontario, Canada. Why? Because Ontario has had smart meters and time of use pricing for the home owner longer than anywhere else in North America.

The OEB breaks down a 24-hour day into 6 peak hours, 6 mid-peak hours, and 12 non-peak hours. The timing of the peak and mid-peak hours changes from summer to winter, but the non-peak doesn’t.

Two Peak Seasons

So when does summer end and winter begin? The OEB calls winter November 1st to April 30th and summer is May 1st to October 31st. That fits roughly with our current usage pattern for our example home. It will vary depending where you live.

The OEB rates for last year break down as follows. The summer rates were 16.1 cents/kWh for peak, 12.2 cents for mid-peak, and 7.32 cents for non peak. The winter rates were 17.5 cents/kWh for peak, 12.8 cents for mid-peak, and 7.68 cents for non peak.

Time of Use Pricing Summer and Winter

To get a really accurate calculation, you’d need to know exactly what your energy usage is during each daily period. Without hourly data from a smart reader, you cannot know. We made some calculations based on the report, Time of Use Rates in Ontario, created by Navigant for the OEB. A typical day ends up looking like this:

Percent of kWh per Day by Hour of Day

In the chart above, green areas represent non-peak hours, yellow areas represent mid-peak hours, and red areas represent peak hours.

Take a minute to look at the chart and make sure you understand what’s going on.

For each month of the year, multiply the daily average kWh by the percentage of kWh/day for each hour of the day. That will give you how many kWh you might use for each hour of the day for that month.

Average kWh/day x % of kWh/day for the hour of the day = kWh/h

To get the energy cost for that hour of the day in that month, multiply the kWh/h by the TOU $/kWh for each hour of the day.

kWh/h x TOU $/kWh = $/h

Then you can add together the energy cost for each hour of the day and figure out your energy cost for the entire day. Multiply that by the number of days in the month, and you get a good idea what your energy cost would be for that month under TOU pricing.

SUM($/h) * Days in Month = Monthly Energy Cost Under TOU Pricing

If you do all this in a spreadsheet, it ends up looking something like this:

kWH per Hour Plus Cost per Hour plus Daily Avg

At a glance, you can see that switching to TOU pricing should start to save you money right away. You should go from $1,110 per year down to $827, saving you $209 per year. So the Powerwall will save you even more, right?

How Much Will The Powerwall Save Me Over Time Of Use Pricing?

Let’s assume that your 2 Powerwalls will meet your peak-rate usage every day, and charge up strictly on the non-peak hours. That’s not exactly the case, but it’ll do for now.

We’re also going to assume that the Powerwall and the inverter are 100% efficient at charging and discharging energy. They aren’t, but it makes for a more complicated calculation. Each time electricity passes in to, or out of, the Powerwall or the inverter, there is energy lost.

The chart below shows how much energy you’re shifting from peak to non-peak hours. It also shows you the cost difference per day, per month, and per year. It’s not very encouraging.

Time Shift Energy Savings

Doing a complete energy shift only saves you about $89 per year.

Let’s look at the Powerwall’s real efficiency now. The Powerwall has an efficiency of 92%. The inverter’s efficiency is about 93% and the charging part’s efficiency is 85%.

System Efficiency = (Powerwall Efficiency x Inverter Efficiency x Charger Efficiency) x 100
System Efficiency = (0.92 x 0.93 x 0.85) x 100 = 73%

So at best, we’ll save 73% of that $89 per year or about $65.

Add that to the savings from switching to TOU billing and you save $274 per year.

$209/yr TOU Savings + $65/yr Powerwall Savings = $274/yr

That’s not very encouraging. You’ve got an $8,300 investment in this. It will take almost 38 years to earn back that.

Tesla says the Powerwall will last 10 years. That’s based on it only being drained by 50% and then recharged completely every day. That tells you that in this scenario, the Powerwall will never pay for itself. We’re not the only ones that think so.

So What’s The Point Of A Powerwall?

There have been a lot of assumptions made in this exercise, but not so many as to cloud the issue. Building in the specific numbers for efficiency, energy costs, energy consumption, and everything else we’ve glossed over, there’s no way you’re going to save $830 per year. That’s what it would take for the Powerwall to pay for itself in 10 years.

Like any technology, the idea at first is always greater than the reality. If you go completely off-grid, the Powerwall makes sense. Perhaps that will encourage more people to go off-grid.

Electricity costs will continue to rise, and battery prices will continue to fall. There may be a point where having a Powerwall just to get over peak-hour costs will make sense.

Time Of Use Historical Prices

When that time comes, our collective culture should be more open to the Powerwall. It will have been around for a decade or more, so we’ll think it’s commonplace and be more likely to adopt it. That’s what’s happening with electric cars right now.

Elon Musk has a vision. His team has a vision. They’re all pretty smart people. The vision is good and one that will eventually benefit us all. In that light, the Powerwall is a good step. Even if it isn’t putting money in our pockets today.

What Else Can I Do to Save Money on Electricity?

The simplest thing you can do is reduce the amount of electricity that you use Be An Energy Star: 20+ Reddit Tips That Help To Slash Your Utility Bill Be An Energy Star: 20+ Reddit Tips That Help To Slash Your Utility Bill Is your utility bill killing you? Who would have thought that Reddit is a source of wisdom for saving energy & money? Reddit's crowd wisdom can help you solve everyday problems, like gigantic utility bills. Read More . Getting an energy audit of your home can help you identify things you can do to save money. Often, these energy audits are partly, or completely, subsidized by government initiatives.

Sometimes, you can even get a rebate on making the improvements they suggest. That could be putting in better insulation, changing to LED lightbulbs 9 Creative DIY Lighting Projects for the Home 9 Creative DIY Lighting Projects for the Home Read More , moving from baseboard heaters to a mini split ductless air conditioning and heating system, and many other options.

Thickness of Fiberglass Insulation in the Attic

Changing from manual thermostats and electrical controls to new smart devices can save you money 5 Smart Hacks To Save Electricity In Your Smart Home 5 Smart Hacks To Save Electricity In Your Smart Home he trick to saving electricity is in knowing where most of your energy is consumed. Read More . Partly by turning things off automatically when not needed, and partly by showing you your energy usage patterns. Used properly,  you could cut your heating bill in half with the Nest thermostat 7 Nest Automation Tricks to Cut Your Heating Bill in Half 7 Nest Automation Tricks to Cut Your Heating Bill in Half If there were a Nest thermostat in every home, it would have the biggest single impact on energy consumption in history; and it could save you more money than you might imagine. Here's how. Read More alone.

Nest Smart Thermostat

You could also save thousands by building a few alternative energy DIY projects 3 Alternative Energy Home Projects That Could Slash Your Electric Bill 3 Alternative Energy Home Projects That Could Slash Your Electric Bill Let’s take a look at how we can take on some simple alternative energy DIY projects and save tons of money. Read More . They’re inexpensive to make. They’re also simple enough for the first time DIY’er to make.

Of course, there’s always the option of going solar. You may not have to go off the grid completely, but innovations like Google’s Project Sunroof make going solar a lot easier Want to Go Solar? Google's 'Project Sunroof' Wants to Help Want to Go Solar? Google's 'Project Sunroof' Wants to Help Google Maps is an incredible tool. It can direct you to the pizza place, or help you avoid traffic jams - but can it cut down your electric bill? Actually, yes. Meet Project Sunroof. Read More .  You might even be able to make use of  some affordable solar system leasing programs 4 Companies That Will Help You Run Your House On Free Solar Energy 4 Companies That Will Help You Run Your House On Free Solar Energy With all the electronics that are running in your smart home, you need some juice to power it all. And there's nothing better than not worrying about climbing utility bills by using solar energy. Read More . You can also start small with solar powered devices 12 Awesome Solar Powered Gadgets That Every Home Should Be Using 12 Awesome Solar Powered Gadgets That Every Home Should Be Using Solar power provides cleaner, more sustainable electricity, but few people can afford solar panels, and few power providers invest in solar power generation. It's time to take solar power into your own hands. Read More around the home.

Creative Edge Solar Charger

Ultimately, the best way to save money on electricity, and energy in general, is to do a combination of all these things. That’s a lot to imagine! But simple patience and persistence can get you there faster than you might think.

Image Credits: OEB Time of Use Historical Pricing, Two Peak Seasons, via Ontario Energy Board, MagnaSine Magnum Inverter Charger, Smart Meter, via Flickr, Check Thickness of Insulation, via Shutterstock

  1. Jon
    December 18, 2015 at 8:15 am

    Interesting article. I agree that overall it is quite questionable if the Powerwall will actually save you money in the USA (probably, in most places in the USA it will not) but there are a couple of things which should be taken into account as well. So, no point fingers that anything is wrong just more information for people who are interested and for some crazy reasons read comments.

    Average electric consumption is 2x-3x times higher than rest of the world. We can put it on double compared to Europe for example(1). This generally allows you to only get one not two if you live outside of USA or Canada(Ye, shiping costs exist but there are other companies offering similar products, NEC in Japan, couple of German companies, etc.).

    The grid tie-in inverter is (not) required. The "islanding problem" (battery making the electric lines dangerous by releasing electricity back) is somewhat of a controversial one. The electric companies are yelling that this is a huge problem while most research points out that "well, not really"(2). Probably that one will not be solved soon.

    Now the somewhat fun and interesting point about non-peak-time charging is that it does lower cost and CO2.(3) It's a bit counterintuitive at first. So, if we use the same amount of electricity but the demand is more or less constant it costs less to produce the same amount of energy. This is because more energy is lost on the electric lines where "more" electricity is sent, turning the generators on/off costs more and takes time, and to be able to get to the peak the generates work at non-optimal higher capacity. So, by using batteries we can reduce peak consumption, and thus reduce the cost of electricity for the consumer (even those who don't have batteries). But, yea I am still perfectly certain that the electric company wouldn't transfer this savings to the end users. They are in it for the money. We'll probably get more research on this in next few years.

    The last part is that, probably, the powerwall will be pushed out more as a reliability thing. The number of 1 second blackouts during summer has been increasing over the years simply because the number of electric loads is overloading the physical limitations of the electric grid. There is only so much electricity you can send over a low voltage line before it overloads just like an extension cord with more extension cords. As electric consumption keeps increasing battery storage will also start to become more interesting since the electric companies will be jacking up the prices.

    (1)
    http://shrinkthatfootprint.com/average-household-electricity-consumption

    (2)
    https://en.wikipedia.org/wiki/Islanding#Questionable_rationale

    (3)
    Hung Khanh Nguyen; Ju Bin Song; Zhu Han, "Distributed Demand Side Management with Energy Storage in Smart Grid," in Parallel and Distributed Systems, IEEE Transactions on , vol.26, no.12, pp.3346-3357, Dec. 1 2015
    doi: 10.1109/TPDS.2014.2372781
    URL: http://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=6963474&isnumber=7323921

    (4)
    Petrou, K.; Quiros-Tortos, J.; Ochoa, L.F., "Controlling electric vehicle charging points for congestion management of UK LV networks," in Innovative Smart Grid Technologies Conference (ISGT), 2015 IEEE Power & Energy Society , vol., no., pp.1-5, 18-20 Feb. 2015
    doi: 10.1109/ISGT.2015.7131843
    URL: http://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=7131843&isnumber=7131775

    • Guy McDowell
      December 28, 2015 at 9:14 pm

      All things I would have loved to include in the article. But at some point it goes from being an article to a paper. :)

      For the grid tie-in, there is still some question, true. However, the only fact that matters is whether your power company or gov't requires it. Sucks, but that's the way it goes.

      The other thing I've seen once or twice is a locked shut-off switch outside the home. The power company holds the only key. That way, if work needs to be done they can lock-out your home like they might any other power supply.

      Of course, there's a problem with that. The power company could lock out your power and forget to to unlock it. That's why I'm not a fan of that solution.

  2. Todd Clay
    December 17, 2015 at 11:43 pm

    Sounds like CFLs.

    • Guy McDowell
      December 18, 2015 at 2:17 am

      Kind of, doesn't it?

      I ran out and switched all over to CFL when that was the thing to do, and the prices dropped closer to incandescent bulbs. It did save me a significant amount on electricity charges.

      Then we got told we couldn't put in them in the trash or recycling. I'd have to drive them to a disposal depot and pay to get rid of them. That was the end of that.

      But then better technology came along. We make mis-steps along the way, but we'll get there.

  3. rez
    December 17, 2015 at 12:13 am

    Whether or not there's big savings that we can see immediately something we HAVE to factor into the cost is how much CO2 emissions we are saving, and how much will it save the planet if more of us adopted the Powerwall.

    You have to remember why the Powerwall exists in the first place: we're trying to address global warming. Saving money is not the main idea, it's a possible added bonus that makes it attractive.

    • Wayne Earl
      December 17, 2015 at 10:51 am

      Actually, that makes all batteries more wasteful then fossil fuels. Firstly, they are manufactured from them. Secondly, large batteries are all toxic.

      Pay attention to the Prius on in the highway accident. It takes a hazmat team to clean up after it.

    • fcd76218
      December 17, 2015 at 10:31 pm

      @rez:
      How does the Powerwall mitigate CO2 emissions and address global warming? You still have to recharge it with electricity from some source. Powerwalls do not automagically recharge themselves out of the thin air.. No matter what electricity source is used, there is pollution released at some point. Wind and solar pollute between obtaining the raw materials and making the turbines and solar panels. Fossil fuel and nuclear pollute from the moment the mining operations are setup until long after it is used in case of nuclear. I suppose the least polluting method would be to have your own water wheel spinning your own generator.

      How much pollution does the making of a Powerwall itself release?

      • rez
        December 18, 2015 at 12:15 am

        Ummm... the powerwall is meant to be powered by solar panels on your roof as the article explains. The point here is, what if all electricity was generated by solar power, even the amount used to build the solar panels? The Powerwall and Gigafactory are just the batteries that hold solar power.

        • fcd76218
          December 18, 2015 at 12:54 am

          I agree that once the solar panels are installed, there is very little pollution of any kind. However, how much and what kind of pollution is created in making the solar panels? From the moment you start digging for the raw materials through the smelting and refining process, through making of the actual PV starta and all the necessary circuitry, through assembling the panels, to delivery and installation, pollutants are generated. Google how Photo-voltaic panels are made. It will surprise you.

          Bottom like is that no matter how Al Gore and the environmentalists (sound like a singing group) huf and puff and jump up and down, throwing hissy fits, there just ain't no way on this Earth to generate energy without pollution. Too bad human beings did evolve to be able to use sunlight directly.

        • Guy McDowell
          December 18, 2015 at 2:11 am

          Hi Rez,

          I'm glad you read the article and are for energy independence.

          Something you might have missed in the article was that it was entirely intended to see if a Powerwall would save someone money just by time-shifting their electricity usage.

          Near the end, I write that the real savings with a Powerwall is to use them in an off-grid situation where you want battery back-up. The Powerwall is less expensive, smaller, and more efficient than a lead-acid battery bank of the same capacity.

          I talked about that much more in my article, The Oil Killers: When Google’s Data Meets Tesla’s Visions and MIT’s Brains.

          You're definitely on the right track. Just got a bit ahead of the article. :)

        • Guy McDowell
          December 18, 2015 at 2:19 am

          Hey Rez,

          Close, but not quite. I didn't say the Powerwall was meant to be used only with solar panels. I did say it makes more sense and savings with solar panels.

          Elon Musk was the one that said using these as described in the article would save you money. I was just putting that to the test.

          I think Musk means that if we ALL did this, it would save a lot of money on electricity production. And it would. But I highly doubt those savings would be passed along to us by the power companies.

        • rez
          December 18, 2015 at 2:51 am

          Thanks for your reply. I wasn't really summarizing your article though, but just pointing out the overall possibility of the Powerwall. I agree that Musk is pitching it as a money saver, but I don't think it is. It is, however, and Earth saver if we do it right.

        • Guy McDowell
          December 21, 2015 at 8:39 pm

          I agree.

  4. fcd76218
    December 16, 2015 at 8:26 pm

    "The Tesla Battery Could Change The World – But Does it Actually Save You Money?"
    Early adopters always get hosed when buying new technology. It's only when the technology becomes commonplace that the real savings occur. Give it a couple years and Tesla will be selling 20kW for $1,000 or less. Ifn other manufacturers get in on the act, the capacities will rise and prices will fall quickly. When the first PC HDs hit the market, they were $500/Megabyte. Now for that money we can get a 1 Terabyte SSD.

    "What Else Can I Do to Save Money on Electricity?"
    Do not try to maintain shirt-sleeve temperatures all year round. Lower the thermostat in the winter from 72 degrees to 68 or lower and put on a sweater or a sweatshirt. In the summer raise the thermostat to 70 or 72 degrees. Lower settings in the winter and higher settings in the summer will also save electricity even in a smart home.

    • Guy McDowell
      December 18, 2015 at 2:13 am

      YES!!!! Absolutely. I would love to shout from the mountain tops, "First, start by not using so much for frivolous things!!!!"

      But people get REALLY upset when you tell them to put a sweater on, wear some socks and slippers and stop trying to make the house into Aruba. You want to be that warm? Move there.

      Maybe it's my delivery that puts them off.... :D

  5. jusandos
    December 16, 2015 at 6:39 pm

    Tesla bringing coal fired electricity in cute packages...

    • Guy McDowell
      December 18, 2015 at 2:20 am

      Pretty much, at this point. He’s pointing in the right direction though. The specifics might be off right now, but we’ll get there.

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