Good News! Tesla Drops Price Of Powerwall 2 By $650 — Less Than One-Quarter Previous Price Hike

Tesla Powerwall 2 price cut - Australia

Well, that makes a nice change…

This morning I woke up, checked the horse was still alive, checked the children were still alive,1 and then checked my email.  To my surprise there was one from Finn telling me the price of the Tesla Powerwall 2 had dropped.

I skipped calling the ex-wife to check if she was still alive and immediately went to Tesla’s Australian website to investigate.  I found the price of Powerwall had dropped by $650 from the $12,350 it had been:

Tesla Powerwall 2 price drop - What Australians will pay

The drop is almost equal to one-quarter the price increase Tesla gave it in October, just before South Australia’s battery subsidy kicked in.

October’s Price Increase

In October 2018 Tesla increased the price of the Powerwall 2 by $2,750.  Because I’m a terribly suspicious person, I think this may have had something to do with the $6,000 subsidy it was set to receive in South Australia, which is Tesla’s number one market for Powerwalls.  But I could be wrong.  Maybe Tesla just needed the money and the price increase had nothing to do with the subsidy.

But putting the price up last year seemed odd to me, considering Elon Musk — the CEO of Tesla — had boasted they would get the cost of their battery cells down to $143 per kilowatt-hour by the end of last year.  While it seems they only managed to get them down to around $159 that’s still a hell of a lot less than what they used to be:

Lithium-ion battery price survey

The dark bluish colour is the average price in US dollars of lithium battery cells (not just Tesla’s) bought in bulk. The light bluish colour is the additional cost in US dollars when built into battery packs. (Image: Bloomberg)

This means with a total battery capacity of 14 kilowatt-hours, there’s around $2,200 worth of battery cells in a Powerwall 2.2  The rest of the cost comes from putting the cells into packs, electronics, a cooling system, the plastic shell, development, marketing, transport, and so on.  That stuff’s not cheap.  But if you believed Elon’s announcements you’d think it would be a lot cheaper than it turned out to be.

This Price Cut Is 23.6% Of The Last Price Increase

As this latest price decrease is only 23.6% of of the last price increase, it will take three more $650 cuts to get the price to almost as low as it was at the start of October last year.  Fingers crossed battery aficionados won’t have to wait 10 months for the next price change.  And let’s really hope the next one is also downwards.

Powerwall 2 Still Won’t Pay For Itself

Unfortunately, even with the latest price cut, the Powerwall 2 is still a long way from paying for itself for any family with remotely normal electricity consumption.  This is especially true outside of South Australia where it won’t get a $6,000 subsidy.

My boss, Finn, has one and it saves him less than $1 a day.  Even if I use optimistic assumptions it’s impossible for the Powerwall 2 to pay itself off while still in warranty.  If I make the following assumptions:

  • It’s installed in South Australia for the optimistically low price of $8,640.3
  • You use a current retail plan from Origin Energy with a solar feed-in tariff of 18 cents and a per kilowatt-hour charge of around 37 cents.
  • The Powerwall 2 is only charged from rooftop solar, giving it a 10 year warranty.
  • The average round trip efficiency is 85%.4  This requires 1.2 kilowatt-hours of solar energy for each kilowatt-hour of stored energy provided, which otherwise could have received 21.6 cents worth of feed-in tariff.
  • Due to battery degradation I’ll assume the average usable capacity over the warranty period will be 90% of its 13.5 kilowatt-hour usable capacity when new.  (Its warranty promises a minimum of 70% of original capacity after 10 years.)
  • Because of variation in both electricity consumption and solar energy generation normal households can’t use 100% of a Powerwall 2’s usable storage capacity each day, so I will assume the average will be 80%.  This is optimistic for a large battery and requires both high household electricity consumption and a large solar power system.

With these assumptions the average amount of stored energy used per day will be 9.72 kilowatt-hours.  Over 10 years it will total 35,500 kilowatt-hours.

Using one kilowatt-hour of stored energy will save the family paying for 37 cents worth of grid electricity, but they will forego the feed-in tariff they would have received for sending 1.2 kilowatt-hours of solar electricity into the grid.  This makes the savings 37 cents minus 21.6 cents, which comes to 15.4 cents.  Multiplying 15.4 cents by 35,500 kilowatt-hours of stored energy use over 10 years gives $5,467.  This is more than $3,000 less than my optimistic estimate for its installation price, so it cannot pay for itself within its warranty period.

If the assumptions above are kept the same, including for battery degradation, then the Tesla Powerwall 2 would have to operate for almost 16 years before the savings on electricity bills exceed its installation price.  That’s nearly 6 years beyond its warranty.  I haven’t bothered to account for capital costs, but if I had the situation would be even worse.

Things Will Change

In my example above I’ve assumed things will stay the same for the life of the Powerwall 2 battery.  But this won’t happen because…

  • Feed-in tariffs and electricity rates will change.
  • New types of electricity plans will appear.
  • Virtual Power Plants may make batteries profitable.
  • Powerwalls could dramatically fall in price.

If any of these changes cause home batteries to pay for themselves — and your goal is to save money — then the time to get one would be when they start to pay for themselves, not before.

If you’re not concerned whether a home battery will provide a positive return, or you are in South Australia and don’t want to risk missing out on the large subsidy, then please go ahead and get a battery.  It’s only if you are hoping to save money by installing one that I recommend holding off.

SA Energy Minister May Have Known About The Price Cut

Last week I spoke with the South Australian Energy Minister, Dan van Holst Pellekaan, who told me $9,300 was “very expensive” for an installed Powerwall 2.  Now the price has been cut, $9,300 is around what I’d realistically expect you’d have to pay to get one installed, so I wouldn’t call that price very expensive.  But it is possible the Minister said it was because he knew the price cut was coming.  Or maybe he just didn’t have a clue about what it really costs to have a Tesla Powerwall 2 installed.  I could go either way on this.

What If I Ordered Powerwall 2 At The Old Price?

If you have ordered a Tesla Powerwall 2 at the old price you can ask for the price cut to be passed onto you.  I don’t know if you’ll be successful, but it doesn’t hurt to ask.

Well, it doesn’t hurt you.  But if you’re running a businesses, I can imagine having people ring up and ask you to lower the price on a product you have in stock and paid the old price for probably hurts a lot.

I would say that if you are getting a Powerwall 2 through a company that isn’t Tesla, don’t get your hopes up about having the price reduced.  They’ve probably already paid Tesla for it.  If you are thinking of cancelling and then reordering, I’ll point out if you’ve put down a 10% deposit, that will be more than the $650 price decrease.

But if you are getting one through Tesla, I’d say definitely ask if you can have the price reduced by $650.  After all, there will have been no real difference between what it cost them to make a Powerwall 2 last week and what it cost to make one this week, so it’s not unreasonable to ask them to give you a break.

A Good Start

I don’t know why Tesla decided to cut the price of the Powerwall 2.  But if I was to take a wild stab in the dark — as opposed to the precise and controlled ones I normally take — I would say it’s because Tesla think everyone who wanted to snap up a Powerwall 2 because of the introduction of South Australia’s battery subsidy has now got one and it’s time to start competing on price again before they lose too much market share to other solar battery manufacturers.  But that’s just something I came up with while waiting for my cat to move so I can report to the children it’s still alive.  It may have no semblance to reality at all.

Okay, the cat just bit me, so I’ll assume it’s alive.  But since it’s name is Schrodinger I have to consider it may be a zombie cat that is both alive and dead at the same time.

Footnotes

  1. I have to do it in this order because if the horse isn’t alive I’ll be all “meh” but if the children aren’t alive I won’t enjoy checking on the horse at all.
  2. Battery cells used for Powerwalls aren’t the same chemistry as ones used for vehicles, but their cost should be comparable.
  3. You are only likely to be able to pay this price if your home is already ideally suited for the Powerwall 2.  There are usually extra costs, so you can generally expect to pay at least $700 more.
  4. This figure is an estimate based on Finn’s Powerwall 2.
About Ronald Brakels

Many years ago now, Ronald Brakels was born in Toowoomba. He first rose to international prominence when his township took up a collection to send him to Japan, which was the furthest they could manage with the money they raised. He became passionately interested in environmental matters upon his return to Australia when the local Mayor met him at the airport and explained it was far too dangerous for him to return to Toowoomba on account of climate change and mutant attack goats. Ronald then moved to a property in the Adelaide Hills where he now lives with his horse, Tonto 23.

Comments

  1. Phil Lloyd says

    Thanks Ronald. Great writing, informative and entertaining.

  2. Do you happen to have a spreadsheet with all the calculations that you can share? I want to put in my own numbers, it would be very kind of you if you could save me the trouble of repeating your work!

  3. Thank you guys, you provide a ray of sunshine as I plough through my email load each day. I mostly crack a smile with each post, sometimes even more than one on a really extended post.
    I took your advice when purchasing a Rooftop PV Solar System as opposed to a “Solar System” which probably wouldn’t have fitted on my rooftop anyway.
    Another purchase I made was a heat pump hot water system, which has also been one of my wiser and more rewarding decisions in my ongoing fight against “my poverty”.
    Gracias

    • Des Scahill says

      Hi Gordon,

      I’ve tried heat pumps myself, but haven’t been too impressed due to the fact that the two brands I tried all karked it within a couple of years, (usually just a few months after the warranty ended), and they are not cheap.

      Interested to know how you go. The alternative of evacuated tubes is way too expensive as well.

      • Erik Christiansen says

        In Denmark (the country, not the town in W.A.), the small town of Sig on the west cost of Jutland uses a bit over a million dollars worth of PV-powered heat pumps to heat a large insulated tank of water for 63% of the town’s heating. Solar thermal provides another 22% (*1). Quite a few Danish towns have fjernvarme (remote heating) companies which distribute heating to the town’s homes via underground insulated pipes.

        The really nifty thing with this setup is that a whopping great insulated tank then substitutes for batteries – and water is a lot cheaper than lithium and cobalt. If 250 L of water heated 34.4°C = 10 kWh, then 250 tonnes = 10 MWh. (I don’t know how big theirs is.) Some people individually do the same here, using heat pumps for slab heating.

        Denmark is hell bent on reducing carbon emissions by 70% by 2030, and this technique can win them 5 to 10% points.

        With the Alaskan city of Anchorage topping 32C in the last few weeks, and French cities topping 41C, the slow learners are now shifting from denial to panic, and there are thinktank proposals to use up to 300,000 airfreighter flights per year to put one Pinotubo of sulphate aerosols 20 km up in the stratosphere each year. Since we are currently heading for 3C warming, and may struggle to pull that back to 2C (double the mayhem we have now), the extra 0.5C drop by shading may be a game changer – if they use biofuel. 😉

        I did worry that the scheme might harm PV production, but I read that one Pinotubo of aerosols amounts to only a 1% insolation reduction. Phew!
        (How much do you wanna bet that the yanks don’t have a go at it once they finally, belatedly, wake up?)

        (*1) https://www.dr.dk/nyheder/penge/groen-stroem-gaar-til-spilde-men-i-landsbyen-sig-laver-de-den-om-til-varme

  4. Great article. Excell sheet as I live in the Territory 25.5 feed in. Get a lot of outages. Very good Rticle. Hope the horse is OK tomorrow and tomorrow and tomorrow. Thanks. Matt R

  5. Great article. Totally agree with the cost of any of these battery storage products. Take the .money you would have spent on any other of these battery storage solutions and pay it off your .mortgage if you have one or put it into a term deposit account and you would save more 🙂

  6. Des Scahill says

    As Ronald recommended in a earlier blog article, probably best to wait at least 5 years until the supply side of things has settled down a bit, any ‘bugs’ in the manufacturing are fully sorted out, and sufficient Australian installers are trained and brought up to speed.

  7. SEAN HOLMES says

    Great article.. i to would like the spread sheet, as our feed in is only 11 cents, so would vastly effect the final numbers

    • Ronald Brakels says

      I don’t actually have a spread sheet, but I believe we will get a battery calculator on the site in the future. Unfortunately, I don’t know when.

  8. Bret Busby says

    So, how does the price of the imaginary Tesla Powerwall 2 compare with the LG equivalent capacity one; installed price?

    And, if the cat is named Schrodinger, can it explain the wave equation, which involves second partial derivatives of a function that has no meaniung unless it is squared??

  9. Thev option of owning an electric car should be included in the calculation even if just a small one like a second hand Leaf. Replacing your fuel bills and using nearly all of the battery capacity every day should improve the economics.

  10. Arthur Bradley says

    So, if the installed cost is $11,700 as you say then with the SA $6,000 subsidy the net cost is $5,700 for SA residents. Was the minister correct?

    • $11.7k is just the cost of the battery. Which is not much more than an oversized paperweight until it is installed. Installation is not free. It’s actually pretty costly (several $thousands) to correctly install a battery.

  11. John Newlands says

    $11,700 divided by 14 kw is $836 per kwh. I’d call this the ‘pre-installation cost’. The Bloomberg chart seems to be from another planet. Am I missing something?

    • Ronald Brakels says

      The Bloomberg chart just shows the cost of battery cells and also what those battery cells cost when connected together in a pack. Nothing else that is needed to make either a home battery storage system or an electric car is included.

  12. We bought the powerwall system in May. We live in an inland town on Eyre Peninsula. We paid about 9000 dollars fully installed after the rebate. This included a couple of days tweaking and improving wi fi connections.
    You might be right about costs although we only get a 6 cent solar rebate and our electricity is 45 cents /kwh but we do get a 25% reduction for paying on time. Our electricity costs are high. Over 1000 dollars a quarter in winter and 300 in summer.
    But we now have guarantveed power supply. This has been very important in protecting us from many minor outages and up to 6 hours while the mains supply was off

    • Ronald Brakels says

      Hi Paul

      It sounds like you would benefit from a change in your electricity retail plan. There are a number of websites that will let you compare electricity plans, but here’s our own:

      https://www.solarquotes.com.au/energy/

      • I get at least one phone call every week from companies urging me to change providers. Ive changed 3 times this year. ATM I am waiting to see what happens in spring summer but overall given usage patterns, no one has been able to provide a better plan. I can get cheaper power but at a much lower, or non existent, pay on time bonus, so that if I pay on time i have the best deal possible.
        So far I am providing no power to the grid,, so that rebate is irrelevant. I am getting about 6 to 8 hours a day free electricity, depending on cloud cover, and this is increasing as the days get longer. The highest expense is night time usage running a heater and reverse cycle. If I have a woodfire going, daily consumption from the grid can be less than 20 kwh, otherwise it can be twice that.

        • Ronald Brakels says

          If you are not permitted to export solar electricity than that dramatically improves the return from installing a battery. With the SA battery subsidy you could install a decent sized one for perhaps $10,000 and it could pay itself off within 10 years while also providing backup — although that backup won’t be as reliable as a generator.

          PS: Sounds like you may need to go on the Do Not Call list.

  13. Out of curiosity, I read somewhere that a Powerwall has greater than nominal capacity in it. For instance, a Powerwall with a nominal capacity of 13.5-kWh has more than this name plate capacity in the box.

    Any truth to this?

    • Ronald Brakels says

      The Powerwall 2 has 14 kilowatt-hours total battery cell capacity (maybe give or take a little) and 13.5 kilowatt-hours of usable capacity when new. This means it has a 96% depth of discharge, which is quite low.

  14. Erik Christensen says

    I would like to know what company sells kWh at 37cents and buy excess solar at18cents per kWh .i am getting 10 cents per kWh and being charged 55cents per kWh .i am in NSW

    • Ronald Brakels says

      That is Origin but in Sydney. Looking up electricity plans for my sister who lives next to the middle of nowhere in NSW I see…

      https://fronius.solarconfigurator.de/solar.configurator/quick

      It’s even better. She can get a 21 cent solar feed-in tariff while paying 31 cents for grid electricity. However, the daily supply tariff is high, so it may not be suitable for a home with low consumption.

    • Ashley Wilson says

      I’m in Brisbane. PowerShop gives me ~22c/kWh effective rate, and it’s all offset by renewable energy production. Feed-in tariff is 9c/kWh. The daily supply charge is 95c/kWh.

  15. Interestingly I received the followint email from Suntrix Solar on the 8th August “Tesla has slashed the price of their Powerwall 2 by $500 – and Suntrix is offering an additional discount for the first 20 customers that sign up for the battery before the end of August.

    We’ll take $100 off if you already have solar; and $200 off if you buy a solar system along with your new battery.”
    Sounds to me like either Suntrix didnt get the full discount from Tesla passed onto them or that they are using some slick marketing to try not to pass all of the discount onto new customers. I emailed them and asked to explain but I am yet to receive a response

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