Guides

Does a Tesla Powerwall 2 make financial sense in 2022? (Complete Guide)

Tesla Powerwall 2 home battery

Australians are about to be hit with an increase in their energy bill. Why? The perfect storm of colder weather (higher energy demand for heating), untimely coal plant maintenance and high gas prices (Ukraine-Russia conflict) have resulted in record-high wholesale electricity prices.

The AER, who sets the default market offer rate, has indicated NSW residents will likely face an increase of between 8.5 to 14.1 per cent and those in SE QLD by 11.3 percent.

With electricity prices likely to hit all-time highs, does the financial case for Australia's most popular solar battery, the Tesla Powerwall 2, finally stack up?

We are going to answer this and also cover:

💲 How batteries save you money;

👩‍👩‍👧‍👧 An example demonstrating the financial case for a Tesla Powerwall 2; and

🔮 The future of home energy.

Tesla Powerwall 2 home battery storage system

How batteries save you money

Like solar, consumers will have different reasons as to why they'll purchase a battery: energy independence, environmental and financial – with the latter the most difficult to decipher.

Batteries reduce your electricity bill by charging when energy is cheap and discharging when it is expensive. This is known as load shifting.

AGL time of use electricity bill

Figure 1 – AGL time of use electricity bill example

To demonstrate how load shifting works, we hopped onto the Energy Made Easy and chose a typical residential electricity time of use tariff plan - AGL's Residential Solar Savers plan (figure 1)

It comprises:

1. Supply charges (cost of getting electricity to your home); and

2. Usage charges (energy you consume).

Usage chargers make up the significant majority of your electricity bill, and are where solar and batteries have the most impact.

Batteries like the Tesla Powerwall 2 can be configured to charge when energy is cheap (off-peak or via solar which is notionally ‘free’) and discharge when energy is expensive (peak times).

The more expensive the energy offset with the lowest cost of charging, the greater the savings. For this reason, flat tariffs are unlikely to make financial sense under nearly any scenario.

The other key consideration when assessing the financial case for Tesla Powerwall 2 battery is the upfront cost.

This is important when assessing the payback period - the number of years for energy savings to repay the cost of the battery.

The case study below will look at the financial case for a solar and Tesla Powerwall 2 battery system by reviewing both the energy savings and total systems costs.

White Tesla Powerwall 2 at home

Case study: The average energy user

Typical Australian energy user: working couple and children.

System details

To illustrate the financial case for a solar and Tesla Powerwall 2 battery system, we’ll look at a customer profile that best reflects:

1. The average energy user; and

2. A common system configuration.

In this case we've modeled the energy consumption (double peak) of a Sydney-based family comprising a working couple and two school-age children.

Operational performance of the Powerwall 2 battery

In this example (figure 3), the Tesla Powerwall 2 employs load shifting to reduce the electricity bill. The battery is primarily charged via solar with off-peak grid charging used where it was economically sensible. Key ‘qualitative’ benefits generated by the system include the:

  • Overall grid energy was reduced by 71% (refer figure 4 below)
  • Almost all peak-hour load was eliminated with remaining load being mainly early morning (off-peak)
  • Carbon offset equates to taking 2.2 cars off the road annually

Financials: Systems cost, savings and returns

The table below summarises the ideal scenario to maximise the financial case for a home battery,

In assessing the financial case we elected to use a typical 6.6 kW solar system ($5,600 installed) and the 13.5 kWh Tesla Powerwall 2 which retails for ~$15,990 installed.

As expected, the stand-alone solar system generates the fastest payback from savings at 5.3 years.

On a stand-alone basis, the payback period of the Tesla Powerwall 2 battery is 15.2 years which falls outside both the 10-year warranty and the 15-year operating life of the battery.

This means the savings from the battery are insufficient to recover the initial capital cost within the respective timeframes.

As you can see the price of the Powerwall 2 battery is the most significant factor in your return on investment.

Outside of Victoria, no direct government subsidies exist for batteries as they do for electric vehicles.

On a system basis (solar and batteries), the combined payback is more acceptable at 10.6 years, albeit still outside 10-year warranty period.

If you were to use a cheaper better such as the 13.3 kWh Alpha ESS battery, which retails for $10,000 installed, the payback period falls below ten years.

While trending downwards, battery prices are still far off the payback periods (five to seven years), which saw residential solar installations take off.

Today, there are over 3 million solar rooftop installations in Australia.

While the figures in this case study reflect a specific scenario, the analysis will be applicable in many residential use cases.

Higher system consumption, better financial returns

A key driver in maximising the financial returns of any solar and battery system is maximising self-consumption. Below we've modeled the same system across three different energy use profiles (medium, high and very high), you will see a strong correlation between usage and better financial returns.

In light of likely further increases in energy prices, the financial case for a 'very-high' energy starts to look very compelling.

Another way of looking at financial returns

Does the Tesla Powerwall 2 make financial sense? It depends.

Another way of viewing the financial case for batteries is by comparing it to other types of common investments.

On a 'system' basis, the annual returns generated could exceed average annual returns from shares and property. On a stand-alone basis, the returns from a Tesla Powerwall 2 exceed current term deposit mortgage rates.

From the numbers we are seeing, there could be a financial case for refinancing your home to purchase a solar system, batteries, or both!

When viewed from this perspective, the case for purchasing a Tesla Powerwall 2 battery starts to look compelling. The possibility that the Powerwall 2 may not work beyond its warranty period or operational life should not be ignored.

Although the financial case for the Tesla Powerwall 2 is still up for debate, customers are increasingly making decisions on a more holistic basis, including recognising benefits such a backup power (for blackouts and outages) and reducing one’s carbon footprint.

Ford F-150 Lightning electric ute powering home in blackout

The future of home energy

Outlook for batteries

While the financial case for the Tesla Powerwall 2 (and batteries in general) is still up for debate (largely dependent on individual preferences), what is not in doubt is the improving economics – driven by declining costs (solar and batteries) and increasing electricity prices. Battery prices have fallen by as much as 89% in the last decade.

Notwithstanding the staggering reduction in battery prices, the recent explosion in electric vehicle production has resulted in record levels of demand, which battery supply chains have struggled to keep up with. For these reasons, Bloomberg New Energy Finance is forecasting a slight increase in battery prices in 2022, however prices start trending down in 2023.

forecast batter prices until 2023
Image by - BNEF

Figure 8 – Lithium-ion battery cost forecast

The other key factor to consider is the increasing difference in off-peak and peak energy prices. As more solar generation comes online, this may have the affect of pushing down peak/shoulder energy prices but increasing peak prices (when the sun) isn't shining.

When is the right time to buy?

So, when will the financial case for batteries 'stack up' like it does for solar today? We believe it could be soon.

With battery price set to reduce by 25 per cent by 2025, we estimate the same battery will cost $11,990.

This would reduce the payback period (based on the profile of the case study above) of a a combined solar and Powerwall 2 battery system to 8.4 years. Bring prices very close to that 'sweet spot' of 5-7 years.

Emerging alternatives

The consensus is that electric vehicles will not only be the future of transport, but will also play a large role in the future of energy (energy storage and grid services).

The imminent availability of bi-directional charging with EVs enables vehicle to the grid (V2G) services which in turn enable the use of your electric car to function as a battery storage system.

This potentially provides the same utility value as a stationary battery.

Given electric vehicle batteries are three to five times larger than stationary batteries and the fact that cars remain unutilised 95 per cent of the time, it poses the question: would your money be better spent towards an EV?

In future stories, we will explore the emerging utility value of electric cars where they will provide services across transport, energy storage, and the electricity grid.

Stay up to date with the latest EV news

  • Get the latest news and update
  • New EV model releases
  • Get money savings-deal

Privacy policy