Battery costs and the smart grid

The GM company recently disclosed, to their vendor’s dismay, that they can buy electric-vehicle batteries for their new Bolt EV for US$145 per kilowatt hour.

It’s rare enough to find costs for these batteries that it’s worth doing a scratchpad computation of what the payback might look like for home electric use.

My home electricity supplier (National Grid) charges separately for energy and for distribution. For energy they currently charge $0.13 per kilowatt hour.  Their distribution rates are a little more complex, but they amount to about $0.09 per kilowatt hour.  So, the overall rate is about $0.22 per kilowatt hour. The building I live in is not suitable for a photovoltaic array, so I’m doing this estimate based strictly on grid power costs.

National Grid, the local utility, is experimenting with a Smart Pricing strategy offering peak-hour / offpeak-hour pricing for their energy. As of now there are three rates:

  • Peak:  $0.125 per kilowatt hour
  • Offpeak: $0.103 per kilowatt hour (nights and weekends)
  • Peak Event: $0.626 per kilowatt hour (times when demand is very high)

So, by signing up for this smart pricing (if it were available in my area; it isn’t yet) I’d save about half a cent per kilowatt hour overall, and 2.7 cents off peak. All those savings would vanish if I had to use any peak-event electricity.

So, let’s say I could run out and buy a 1 kWh battery for $145. Every night I could charge it up, and every day I could run it down. So, it would save me 2.3 cents per day in power costs.  The payback on that saving would take more than 17 years. That’s a long time. Probably the battery’s expected lifetime is less than that.

Now, suppose I lived in a part of Texas where there’s so much wind power available that energy is free overnight. Then I could charge my battery every night and run it down every day.  Then it would save me the whole energy cost of 12.5 cents per kilowatt hour.  Under that regime the payback takes 3.2 years. That’s a little more reasonable.

The Tesla company’s Powerwall domestic battery cost is presently higher than $500  per kilowatt hour.

There’s a long way to go for all this to work. Batteries have to get cheaper (or energy more expensive). The distribution grid has to actually get smart, so domestic power systems can correctly charge their local batteries when needed and discharge them when energy is more expensive. Domestic equipment has to get smart, so it will not consume very expensive peak-event electricity willy-nilly, but only when necessary.

This kind of analysis doesn’t factor in local photovoltaic generating capacity. That’s a valid approach; as local PV generation gets more popular subsidies are  bound to diminish. So, the capital expended on local battery storage must be justified by its ability to time-shift energy delivery from off-peak to peak hours.

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