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Offering Tesla Powerwall with ‘no money down’ option is a clever bid for utility to stay

View from Hogback Mountain, Vermont. Image: wikimedia user: chensiyuan.
Thus far, the relationship between incumbent utilities and the rise of distributed energy storage has been a difficult one. For example, battery system developer Sonnen recently made clear its intent "to make conventional electricity suppliers obsolete" by enabling communities to share energy. However, some forward-thinking utilities are already experimenting with new business models for distributed energy storage: Green Mountain Power (GMP), a utility in the state of Vermont, has become the first U.S. utility to offer its customers home energy storage, with some interesting business models to boot.

The batteries on offer come not from GMP itself, but rather from leading developer Tesla, who the team at Lux reported on in the middle of last year as well as offering analysis on the original Gigafactory announcements and on the launch of Tesla Energy to Energy Storage News. Energy storage remains expensive, so to help out its customers, GMP is offering three different ways for them to put Tesla batteries in their homes, ranging from outright ownership to leasing to shared access:

In the simplest option, the customer simply buys the 7kWh Tesla battery for US$6,500 installed (more than twice Tesla’s advertised US$3,000 price). The customer then uses the battery for his own purposes, like backup and renewables integration. In this scenario, there is limited interaction with GMP, and the utility does not provide much of an added value – customers might as well buy the batteries directly from Tesla.
Alternatively, a customer can buy the battery (again for US$6,500) but opt to share it with GMP, and in return get a monthly credit of about US$32 from the utility. The company has not yet detailed what this sharing entails (how many hours per year, and to what depth of discharge), but has noted that it will use the batteries for peak demand reduction.
Finally, a customer can opt to lease a system for about US$38 per month, and, as part of the arrangement, must share the battery with GMP.

GMP is starting small, with 10 customers first, and then expects to ship about 500 units of Tesla’s batteries in the first half of 2016. The overall addressable market is much larger for the utility, as it provides power to the majority of Vermont’s residential customers. Overall, clients should regard GMP’s strategy as very clever, for two reasons. 

First, it is enlisting customers to help it achieve benefit stacking: By itself, peak reduction will only cover about 60% of the Tesla battery’s cost, according to GMP’s estimates. Therefore, GMP is co-opting its customers to cover the remaining 40%, offering them some benefits like renewable integration and backup for their troubles.

Second, GMP is also clever here because it is keeping its key relationship with customers: Its clients are not buying batteries from Tesla directly, but rather through GMP, giving it a shot at remaining relevant even as new distributed generation technologies emerge.

Cover image credit: Tesla.

The first Powerwall to be installed in Britain at the beginning of this month. In Vermont, by selling Powerwalls to customers directly, GMP is attempting to maintain its key relationship with them. Image: Solar Plants.

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