Tesla boosts Powerwall capability and brings inverters in-house
Tesla has doubled the energy density of its Powerpack and Powerwall 2.0, with the latter now boasting 7 KW of power capacity and 14 KWh of energy storage., meaning the average household could have all its energy needs met by two Powerwalls. The company has also opted out of using third parties for inverters, choosing to create them in-house and housing them within the batteries, streamlining the look and reducing installation costs to customer.
Now that the dust has settled from Elon Musk's splashy product launch on the L.A. set of Desperate Housewives last week, it's worth investigating how much has really changed in the Powerwall and Powerpack battery upgrades.

The Tesla CEO revealed few details about either of his energy storage products. We didn't get fresh insights into the rate of production capacity or deployments around the world.

That said, the key differences from the first generation to the second reveal a company that is pushing ahead with capacity improvements and streamlining the manufacturing process to cut costs. Tesla's batteries generated more buzz than any others when they launched in spring 2015, but the company has not allowed itself to glide on fame alone. The latest announcement ups the ante in an already competitive market.

"There's no shortage of residential storage products -- with more entering," wrote Ravi Manghani, director of energy storage at GTM Research, in an email Thursday. "This glut of residential products in a tiny market would have pushed companies to be aggressive on price, even in the absence of Powerwall 2.0. I believe Powerwall's pricing is symptomatic of ongoing aggressive pricing strategies, rather than a precursor to one."

Here are the notable advances from the product launch.

Double up on energy density

We know that lithium-ion battery costs are coming down as production scales up, but it's still striking to see the residential Powerwall and the utility-scale Powerpack literally double in energy density in the year and a half since they've been on the market.

Any product should improve in quality with successive models, but unlike the different colors and cases that garnish new smartphones, energy capacity improvement is both quantifiable and vital to the widespread adoption of the product. At the moment, residential batteries cost too much and don't do enough for most homeowners to benefit from purchasing them. This kind of dramatic growth in usefulness from year to year will be necessary to establish energy storage as a mass-market product.

The Powerwall 2 wields 7 kilowatts of power capacity and 14 kilowatt-hours of energy storage. For context, the average American household uses about 30 kilowatt-hours per day. That varies widely depending on location, climate and size of a household, but now two Powerwalls put together could power the entire daily needs of the typical home.

All the sudden, the calculus for previously fringe uses, like off-grid and backup power, starts to make a little more sense. Self-consumption soon will be more limited by the size of the rooftop solar array than by available storage. And this trend shows no signs of stopping.

So what's the endpoint for residential battery evolution?

The consistent doubling of power density will ultimately result in a situation where manufacturers can affordably package more energy than a household actually needs. At that point, innovation will shift from bringing costs down to streamlining the services that batteries provide.

Households' daily power needs will swell with the electrification of heating and transportation, so the leveling-off of battery capacity is still a dot on the horizon. Nonetheless, now is the time to look beyond the incremental improvement of existing storage technologies and start envisioning the endgame that we want to see.

Why buy inverters when you can just make them at home?

Besides the power density, the biggest headline was the inclusion of inverters inside the batteries -- inverters made by Tesla, no less.

For Powerwall customers, this means you no longer need an additional box of electronics on the wall next to your battery box of electronics. That's better aesthetically and reduces the space required to install a Powerwall. For installers of both the Powerwall and the Powerpack, this simplifies the procedure, reducing the time and labor needed to erect a functioning system.

Moving all critical functions inside the box also reduces the chances of error when connecting the Tesla battery to a third-party inverter in varying conditions anywhere in the world.

Just like the batteries themselves, the inverters draw on Tesla's prior experience with automotive manufacturing. The company builds its own inverters to handle the flow of electricity from car battery to drivetrain, but it had paid other companies to make inverters on the stationary storage side.

Eventually, Tesla concluded that the inverters produced for storage applications cost more than they should. The company arbitraged the commodity by bringing over cheaper inverters from the automotive sector. That's a blow for SolarEdge, Fronius and SMA, the three verified inverter suppliers for the Powerwall, but it's good news for Tesla customers.

Vertical integration doesn't always work (see: SolarCity's adventure in Buffalo), but here it makes a great deal of sense. If one company assembles storage systems with critical parts from several different manufacturers, it has to pay each of them a competitive margin. That drives up the end price. By making the battery packs and inverters in-house, Tesla can keep costs lower and still take a decent margin for profit.

That makes Tesla unique among battery makers, because other companies rely on partnerships with inverter makers; LG Chem works with Eguana, Sonnen works with Outback, etc. It will be worth watching whether Tesla's rivals move in this direction, but inverter manufacturing is a different sort of expertise. Mercedes-Benz might be best positioned to follow suit for its stationary storage line.

The looks are more than just looks

Tesla has had a year and a half to gather feedback from Powerwall customers and installers, and funneled that into a redesign that better matches form to function.

The initial reaction to the new model is, "Hmm, looks pretty boxy." And it does: Gone are the original's gently rounded edges and turtle-shell hump exterior. But there's a good reason for that.

The curving exterior couldn't bear the weight of the battery, so the first generation had to be mounted on the wall. This limited the orientation and spacing available to it. The hard right angles and rectangular outline of the new version make it easier to handle and allow it to stand on its own -- ground mounting is now possible.

The flat design also lets the units stack back-to-back, so customers can double up without giving up more wall space. The energy density inside the box doubled, and now the energy density of the installation can improve by fitting more Powerwalls into the same amount of space.

It makes sense to launch a product most people have never heard of with a sexy, futuristic design. The second iteration of the Powerwall demonstrates a maturation on Tesla's part, putting ease of use ahead of aesthetics.