Two Cheers for the Powerwall

The buildup — dare we say hype? — lasted throughout the month of April.

Overused words like “game changer” were applied to a new product from Tesla Motors. “A new zeitgeist,” gushed the business news site Quartz.

Yesterday came the formal unveiling by CEO Elon Musk.

“Powerwall is a home battery,” says the Tesla website, “that charges using electricity generated from solar panels, or when utility rates are low, and powers your home in the evening. It also fortifies your home against power outages by providing a backup electricity supply. Automated, compact and simple to install, Powerwall offers independence from the utility grid and the security of an emergency backup.”

Hmmm… On the surface, it seems appealing. If you’re on the electric grid and the juice goes out, you won’t skip a beat. And if you want to ditch the electric grid, you have battery storage for your solar panels and/or wind turbine that doesn’t look like a dozen truck batteries wired together.

It’s a sexy package, especially mounted on a garage wall
next to a Tesla car…

So does the reality live up to the hype? To paraphrase Gertrude Stein about Oakland, is there any “there” there?

Today we turn to four experts for insight — three of them from the Agora Financial team. But first, a few more essential details…

The Powerwall comes in two versions. For $3,000, you get a 7 kilowatt-hour (kWh) unit “for daily cycle applications.” That sounds like off-grid storage for solar panels.

For $3,500, you get a 10 kWh unit “for backup applications.” That sounds like what you need to keep functioning if you’re on the grid and the power’s knocked out.

Both varieties can be daisy-chained if you want more power.

Installation? That’s extra… although another Musk company, SolarCity, will be happy to furnish it.

And if you want an AC/DC inverter allowing you to charge the battery from the power grid, that’s extra too.

Suddenly, the costs are adding up.

But let’s lay that aside and get to the experts…

“There’s a large market out there for getting off the grid, and this is part of it,” says our Byron King.

Byron is our resident oil field geologist… and a longtime solar energy skeptic. But his skepticism began to abate last year as solar finally became cost-effective; he recently recommended a solar stock in the pages of Outstanding Investments.

“Good battery storage has long been the missing link to point-source renewable energy,” he explains. “Store solar by day; consume by night. If there are a billion roofs on the world, the market is vast.

“Is Tesla onto the tight technology? That’s the question.

“Everything has its costs and bugs,” says Byron, considering the Powerwall’s lithium-ion battery technology. “Recall the li-ion battery problem with Boeing’s new 787. Test it. Break it. Fix it. Learn. Not a game changer yet, but part of a major trend I’m following.

“There are other forms of technology out there too,” Byron adds. “Vanadium redox batteries. Fuel cells. Don’t forget old-fashioned lead-acid batteries. Tesla is just one company with no long track record.”

Hmmm… About those fuel cells…

“Batteries take a long time to charge,” says Ray Blanco, one of our high-tech specialists — pointing to an inevitable drawback of batteries.

Ray has urged readers of Technology Profits Confidential to invest in an alternative technology to store solar energy — hydrogen fuel cells. “You can top off a fuel cell’s storage tank fast, much like with gasoline or diesel. Advantage: hydrogen.

“Batteries, on the other hand, are more efficient,” he concedes. “With hydrogen fuel cells, you must first convert the energy to hydrogen using an electrolyzer and then store it. Then when you want to produce electricity, you have to convert it back again using a fuel cell. You lose a percentage of what you started with at each conversion step. Advantage: batteries.

“But electrolyzer and fuel cell efficiencies keep getting better,” Ray points out. “They are also cheaper than batteries. This is especially important for big applications like backup power grid energy storage.”

That said, “There is a place in the market for both. Neither is going to kill the other.”

“I’d like to think it was a game changer, but I don’t think we’re there yet,” says self-sufficiency guru Cam Mather, author with his wife Michelle of The Sensible Prepper.

We introduced you to the Mathers on Monday after paying a visit to the property in eastern Ontario where they’ve lived off-grid for 17 years. Key to making it all work — a lead-acid battery pack that’s nearly as large as a washing machine.

With the Powerwall, “the challenge would be to use the stored energy wisely — drying a load of laundry in an electric dryer would deplete it very quickly. But since many people in urban areas use natural gas for those thermal loads — cooking, hot water, dryer — the Tesla battery to just power the fridge/freezer/lights/computers would be great.”

But will consumers embrace it on a large scale? Not for that cost, says Cam: “People hate utilities and love the concept of going off-grid, but when you do the math of actually generating your own energy with solar and wind, and then storing it so the lights stay on at night, that electricity bill suddenly doesn’t look so bad.”

Still, “from a personal resilience perspective, this is an awesome product.”

“Solar power on roofs is growing so fast it is absolutely astounding,” says Stephen Petranek — editor of our premium tech advisory, Breakthrough Technology Alert.

We held up publication of today’s 5 to squeeze in last-minute word from Stephen — not least because he’s on a first-name basis with Elon Musk.

“You can’t drive through a neighborhood around Washington, D.C., or Phoenix, or Salt Lake City, or LA or many other hubs in America without seeing solar going up on roofs,” Stephen says. “In the end, it can save you a fortune in utility bills.

“It’s also disruptive as can be to utility companies. The battery part of the equation really puts the nail in electric utility coffins. It makes no economic sense to build a house that doesn’t have solar installed from the get-go. This will soon become as common as a furnace or washing machine — it’s the next home necessity.”

Still, “this is a start, not the finish line,” Stephen cautions.

“A Tesla battery will bridge you over a three-hour power outage, but not much further. And it costs as much as a whole-house generator that can run for days on natural gas.

“The technology of this kind of storage doesn’t quite make it yet. That said, if you live in northern California and don’t use air conditioning and go to bed about three hours after the sun sets, you no longer need a utility company.”

[Ed. note: Stephen is in the process of identifying several tiny companies set to profit from Elon Musk’s ambitious innovations. We’re talking everything from cheap Internet access for nearly everyone on Earth… to Musk’s plans for the colonization of Mars.

Until then, Stephen is eager to draw your attention to an extraordinary early-stage opportunity in the biotech space. Wait till you hear his interview with an executive of this firm. “Once the mainstream media pick up on the story,” he says, “everyone will understand why the company’s market cap is projected to rise as much as 1,105% in the next 12 months.” Click here for details.]

Stocks are rallying as the week draws to a close. At last check, the S&P 500 was up nearly three-quarters of a percent — a point shy of 2,100.

Gold is taking another hit, down nearly 1% as we write, at $1,172. Bonds are likewise selling off, the yield on a 10-year Treasury now 2.12%.

Crude is pulling back from its year-to-date highs reached on Wednesday. A barrel of West Texas Intermediate fetches $58.74.

But make no mistake about the trend: “Black gold’s making a big comeback,” says Greg Guenthner of our trading desk…

“Crude supplies and production levels aren’t what’s fueling this recent move,” he says. “But the recently tumbling dollar is. After the dollar’s unprecedented rally, it’s taking a much-needed break, which is showing up in the oil market.” Only today did the U.S. dollar index break a seven-day losing streak.

“Plus, no one’s paying attention to the oil patch right now,” Greg goes on. “They’re too busy nervously watching the stock market retreat from its highs. Oh, and that also means we have the potential to see massive rebound trades in the energy sector while all eyes are elsewhere.”

“I was surprised,” begins today’s mailbag, “by the jocular boys’ club tone that The 5 took in your Canadian absence last Friday — you realize you have women readers, correct?”

[Ah… That must have been the remark about how beer can do “only so much” to make women more attractive.]

“Generally,” our reader continues, “your humor is more subtle and, shall we say, more highbrow. Glad the A team is back in charge.”

“I know it would be politically incorrect for you to haul ass out of Baltimore,” writes a reader concerned for our safety. “But if it were me (a mere country boy), I would revel in letting my lease run down and saying adios.

“In my world (40 years on Wall Street), there was always a consequence for bad behavior. Not so today. Stay safe.”

“The Baltimore riots speak to fundamental underlying problems,” writes another reader.

“When people foul their own nests, so to speak, as some in the city have done, it means they have essentially lost hope for their futures. What are schools teaching young people that they feel this way? What is their personal experience teaching them? What is it about authority, especially the police arm, that causes distrust and makes people revolt? What we have just seen is, after all, a kind of low-level revolt against something people have lost trust in.

“Why, to roughly quote tweets by John Angelos, son of Orioles owner Peter A., have the political elite exported all those millions of jobs to third-world dictatorships and mobilized police to control people’s unrest? Address these questions in a positive way and people will generally react in a positive way. Continue as we have and the revolts — and government reactions — will become stronger and more destructive of our nation.

“And if politicians, and the governments they run, stop seeing business and people as merely a source of funding for their own purposes and personal advantage, that will be a good start. Good luck with that. (Note my own distrust in that last remark.)”

The 5: Events here have calmed down — and your editor finally has gotten enough sleep — to the point where I can assemble a few coherent thoughts while still meeting a daily deadline writing about the economy and the markets.

The cops had no business stopping Freddie Gray in the first place. In a free country, making eye contact with the cops and then running away should not, by itself, constitute reasonable suspicion justifying a police stop.

And it doesn’t… unless you happen to be in a “high-crime area.” Then, you’re fair game. The courts, up to and including the U.S. Supreme Court, have said so time and again. The Fourth Amendment’s prohibition against unreasonable searches and seizures? It doesn’t apply.

We’ve written now and then about the erosion of the Bill of Rights, coupled with the growing militarization of the police. For most of us, it’s still a hypothetical issue.

But in the inner city, it’s been daily reality for decades. Writes author Patricia Fernandez-Kelly in a book about west Baltimore, “Growing up poor in the richest nation in the world involves daily interactions with agents of the state, an experience that differs significantly from that of the more affluent populations.” [Emphasis ours.]

“People run every day from the police,” elaborates Danielle Hall, a friend of Freddie Gray. “Why wouldn’t you run when every time you turn, you’re getting harassed?” she told The Associated Press. “Why stop when you already know what they’ll do to you? Rough you up, throw you on the ground?”

Most of the time, people in the inner city sit back and take it. On Monday, they stopped taking it. In a sense, they withdrew their consent to be governed by the Baltimore police force. (In no way does that justify trashing private businesses, so spare me any outraged emails.)

If you’ve been following Chris Campbell’s dispatches at Laissez Faire Today, you know the street gangs in Baltimore have served to soothe the conflict: “They are reportedly breaking up fights and encouraging people to go home for curfew.”

Another way to say it is this: The gangs have accrued a measure of legitimacy to govern that the cops forfeited. There are parallel governments in pockets of Baltimore this week, existing uneasily side by side.

This morning, the state’s attorney announced the six officers involved in Gray’s death will face charges. The official system of governance — the gang outfitted with badges, as it were — will presumably regain the legitimacy it lost a few days ago.

At least until the trial…

Have a good weekend,

Dave Gonigam
The 5 Min. Forecast

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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