Sun and wind energy are free but because of its variability, its future hinges on economically competitive energy storage solutions.

“The issue with existing batteries is that they suck,” said Elon Musk, Tesla’s CEO. The company launched its battery products Powerwall and Powerpack last April 2015.

Tesla Powerwall is a 7 kWh lithium-ion-battery system that stores electricity generated from rooftop solar panels during the day so that electricity can be used at night during the peak-usage times. Tesla also has a 10kWh weekly cycle version intended for back-up applications, but it is the 7kWh version that will be seen in most home installations.

One of the Australian providers of the Powerwall, Natural Solar, says that there are only two inverters currently on the market which are compatible with the Powerwall, so most existing solar panel owners will need to obtain a new inverter.

The 7kWh Powerwall with 10 year guarantee sells for U$3,000 (A$4,100) in the US. In Australia, it will cost a home-owner with existing rooftop PV between A$12,000 and A$12,500 depending on the new inverter chosen.

Electricity retailer Origin will sell complete home energy solution including new solar, inverter and Powerwall from A$16,500. At this price, most Australian home-owners’ payback period is estimated to be more than 20 years.

Considering the battery’s warranty is for 10 years, the current economics for home-owners are still far from ideal.

In a 2015 report, Deutsche Bank points to the commercial-scale market as one of the first areas where battery deployment will flourish. Most commercial customers are subject to demand based charges. A differentiated battery solutions with intelligent software and predictive analytics that can smoothen electric demand to lessen demand charges will pave the way for mass adoption.

Tesla Powerpack is the company’s commercial/utility-scale rechargeable battery, which is currently estimated to cost U$250/kWh, with the “gigafactory” expected to cut battery prices by 30%.

According to Deutsche Bank, the cost of a typical lead-acid battery may be as low as ~$200/kWh, while best in class lithium-ion technology was producing commercial/utility packages in the ~$500/kWh range at end 2014 – half the cost of the ~$1,000/kWh 12 months prior.

Deutsche Bank also believes that 20-30% yearly cost reduction is likely for lithium-ion batteries, which could bring them at commercial/utility scale to the point of mass adoption potential before 2020.

By 2024, Tesla is expecting that its Powerpack battery will cost U$100/kwh. Separately, the US Department of Energy has targeted battery cost levels of U$125/kWh by 2022.

Deutsche Bank believes that with the significant cost reduction over the next 5 years, batteries paired with solar may become significantly more economical in the future on a levelized cost of electricity (LCOE) basis.

Illustrative example of system with batteries

According to the International Renewable Energy Agency, annual battery storage capacity is expected to grow from 360MW to 14GW between 2014 and 2023.

With rapidly evolving technologies and falling costs, the world just might see a wider adoption of renewable energy with storage over the next few years.

“The goal is complete transformation of the entire energy infrastructure of the world,” said Musk.