Tesla is changing the electric grid
From CNET Magazine: The next power plant could be that giant battery in your garage.
There's a good chance flipping on the light switch 10 years from now will feel just as ordinary as it did for your parents and grandparents.
But behind the scenes, a radically different system for sending electrons where they're needed will be turning on those lights. Electrical power that today comes from massive centralized generation stations could originate from your neighbors' solar panels, then wait a few hours in a mammoth battery in your garage until you get home.
That's because the biggest change to our power grid since it was first built more than a century ago has begun. And this time we're all sharing the control once held by the companies that generate power and ones that distribute it.
Ordinary citizens, startups and decades-old power companies are all involved in the transformation. But one of the trend's biggest visionaries — and beneficiaries — is Tesla CEO Elon Musk. He'll sell you solar rooftop tiles to generate electricity, a giant battery to store all that energy and an electric car to suck it up.
Musk is a few steps ahead of the market. But he's helping to create a power grid where anyone can generate electricity as well as consume it, and where large batteries in the home — and even in utility companies — absorb electric power when there's plenty and pump it out when there's not enough.
"We're trying to move away from that traditional one-directional grid," says Vivek Narayanan, who leads grid innovation efforts at California utility Pacific Gas & Electric. "We're evolving toward the grid of the future."
Most of us fuel up our cars before we run out of gas. But the electric grid works differently. Power and utility companies must exactly balance supply with what people consume at any given moment. UK grid operators famously must cope with a demand surge after the TV soap opera "EastEnders" ends, when thousands of people start boiling water for tea.
It's remarkable the power grid system works as reliably as it does. Here's a personal finance comparison: Many people keep a cushion of cash in their bank accounts to absorb daily financial fluctuations, but grid operators have to work with zero cushion.
Here's where the future gets tricky.
Coal, hydroelectric and nuclear power plants usually produce a steady supply of electricity. Others, like the increasingly common ones burning natural gas, are switched on to meet peak demands. But alternative energy sources, chiefly solar arrays and wind turbines, only work when the sun and wind cooperate. That makes it harder to match supply and demand, especially when people get home from work just as solar panels stop generating.
The Trump administration wants a coal-power renaissance, global warming notwithstanding, but plunging natural gas prices mean coal's days are over, says Jonathan Mir, head of the North American energy infrastructure practice at Lazard, an asset management firm that advises industry clients.
"The Republican administration should remind themselves of King Canute, who showed one cannot command the tides," Mir says.
Which brings us to big, honkin' batteries.
"Today you have a grid built to meet demand of the hottest minute of the hottest day of the hottest decade," says Michael Oster, CEO of Eos Energy Storage, which makes batteries for grid operators and plans home batteries, too. "If you have storage, you're able to build the grid more toward the average."
That can pay off for utilities. Grid-scale battery storage systems like Tesla's Powerpacks deliver enough juice to power hundreds of homes. They're not cheap. A megawatt Powerpack installation, enough to run 750 homes for 4 hours, costs about $1.8 million. But that still can be cheaper than upgrading transmission lines and other equipment.
Pacific Gas & Electric has installed a 2,000-kilowatt-hour battery at an electrical substation 50 miles north of Sacramento, enough to power about 375 homes for four hours. That's as much battery capacity as 33 Chevrolet Bolt electric cars or 36,400 of Apple's 13-inch MacBook Pro laptops.
Two other Tesla Powerpack installations are considerably larger. Kaua'i Island Utility Cooperative in Hawaii is using a 52-megawatt-hour battery — the capacity of 870 Chevy Bolts — and Southern California Edison's new 80-megawatt-hour battery is like 1,330 Bolts.
Big, big batteries
Expect more. Tesla thinks it can cut battery costs by 30 percent when its gargantuan Gigafactory battery plant hits full capacity, between 2018 and 2020. Solar and wind power took off when prices dropped, and electrical storage will likely follow the same pattern, says Lazard's Mir.
Grid-scale storage makes sense for utilities, but Tesla would love for you to buy a $5,500 Powerwall 2 for your home, saying a single battery "can power an average two-bedroom home for a full day." Costs rise to $7,000 with installation.
That's a hard sell, says Mir, who believes such batteries don't make financial sense for most of us. Jim Lazar, a senior adviser to the Regulatory Assistance Project, does see a place for battery storage — but only after people embrace cheaper options like utility-controlled water heaters or ice-making air conditioners that consume energy only during off-peak hours.
"The $500 water heater stores as much energy as the $5,500 Powerwall," he says.
But energy pricing changes could alter the equation.
Right now, most people with rooftop solar panels pay for the electricity they use from the grid minus what they generate — an arrangement called net metering. If you consume as much as you generate, you don't pay a cent. That's great for you, but it's a lousy way for utility companies to run a business.
More than 40 states have net metering policies, and that's caused friction between some utilities and fans of solar energy. To better align costs with peak demand times, states like California are changing net metering rates and regulations.
Scrapping or adjusting net metering could push people to buy batteries for storing energy generated at home. And charging lots more for power during high-demand hours — an increasingly common billing strategy — could eventually make batteries more economical. If tariffs and regulations do change, expect a "tremendous expansion" in home storage, says Loic Gaillac, senior manager of the advanced energy storage group at Southern California Edison.
As millions of homes light up the power network, utilities will adapt or die, Lazar says. "That evolution is inevitable, necessary and under way."
It'll be messy, too, but tech entrepreneurs like Musk thrive on upsetting the status quo.
As with the arrival of rooftop solar tiles and electric vehicles, you'd better get used to it.
Correction, July 5 at 11:33 p.m.: Corrects the scope of Eos Energy Storage's business. The company offers energy storage products for grid operators and plans to sell home batteries.
This story appears in the summer 2017 edition of CNET Magazine. Click here for more magazine stories.