This Is Why Tesla Batteries Are So Expensive

This is Why Tesla Batteries are so Expensive

Tesla is a well-known car manufacturer that was founded by Elon Musk. Their cars are unmistakable. They often are built with a sleek design and aside from that, they run solely on electricity. It is a coveted vehicle for anyone trying to get rid of the expense of paying for fuel and want to help promote a healthier environment for life on Earth. So why the heck are the cars’ batteries so darn expensive?

This is why Tesla batteries are so expensive. Tesla did not originally make the batteries that powered the vehicles. Due to this, there were a lot of complaints that the Teslas were too expensive for the middle-class citizen and this prompted Elon Musk to promise to work with battery manufacturers to address the issues of cost and distance driven between charges to help the batteries cost less.

The Tesla is a special type of car that appeals to both the middle and upper class because of its visually appealing design and ability to run solely off of electricity. However, the cost of the battery required to power the car is a deterrent for some people whose pockets aren’t as deep as others. Knowing why the battery is so costly may help to better understand the issue and even maybe provide a solution.

The Issues With Current Tesla Batteries

The current batteries used by Tesla are constructed and distributed by Panasonic. One of the main issues that Panasonic has is that the supply of batteries does not meet the current demand for them. From an economical standpoint, this is a basic supply vs demand scenario and has a dramatic impact on a product’s cost.

Supply vs. Demand Definition: In supply vs demand in an economic model of price determination in a market. The way that supply vs demand affects the price is that assume all products are held equally. When it is less available on the current market than its demand currently is, the cost of that product will be increased to address the demand for the product. The less there is, the more expensive it will be.

According to Tesla, Panasonic’s pace has been a constant issue when supplying the batteries for their cars. Since the demand continues to outpace the supply, it has continued to be an issue in regard to the cost involved in the production and sale of the batteries.

Tesla Battery Cost in Relation to The Vehicle Itself

Another factor in the cost of the Tesla battery is the value of the battery itself. The Tesla is powered on a lithium-ion battery. Lithium is inherently an unstable substance and when being used in the construction of lithium-ion batteries they must take care to construct the battery carefully to ensure that the battery is sealed and secured properly so that it can withstand the impact that is common in car crashes.

Ensuring that the lithium-ion batteries are sealed and secured properly is a lengthy and detail-oriented process and due to the expense of ensuring that this is done correctly also has a direct influence on the cost of the batteries for the vehicle. 

Teslas are essentially battery packs on wheels. The Model S version of the Tesla, for example, has roughly 60-kilowatt hours of power in its electrical capacity. As a matter of fact, its battery is directly responsible for 42.25 percent of the price of the vehicle, which is priced at $35,000.

Enter the Tesla Powerwall

In an attempt to get a better handle on the cost and reliability of the batteries that power the Teslas, Elon Musk, the owner and creator of the Tesla developed what they call the Powerwall. By their description of the Powerwall, the Powerwall is a rechargeable lithium-ion battery with liquid thermal control.

Tesla is one of the few companies in the residential energy storage industry that develops smaller scale batteries for home energy storage. The first generation of the Powerwall was released in April 2015 and the updated Powerwall 2.0 was announced in October of 2016.

The price of the Powerwall 2.0 before 2018 was listed at $5,500 (not including the cost of installing the battery) since then, there has been an increase in the cost of the battery. The cost has since risen to $6,700 before the cost of installation.

These battery packs are designed to be paired with solar panel systems and are ideal for individuals who are not connected to a conventional power grid or don’t want to be dependent upon a utility company for electrical power.

Tesla’s Powerwall batteries are powered and charged by solar energy. This is also a factor in its cost since it doesn’t require the battery to be plugged into the home in order to be charged. This may cause the battery to be a little more expensive than what people would like but it is beneficial in cutting your overall energy costs in the long run, making the investment worthwhile.

What is the Overall Cost of the Tesla Powerwall?

The Tesla Powerwall 2.0 offers 2 times the electrical storage capacity of the original Powerwall that was debuted in 2015. As it was stated earlier, the Powerwall 2.0 currently has a cost of $6,700 outside of the cost of installation. What was not mentioned before, was that the hardware that supports the battery adds another $1,100 to the total cost of the battery bringing the cost to $7,800.

Installation is another matter in itself. Depending on the amount of work necessary to have the solar-powered battery installed, you may be looking at an installation cost that can add another $2,000 to $8,000 to the total cost associated with the Powerwall 2.0.

Be sure to take a moment to note that the listed price is not reflective of the total cost associated with the Powerwall 2.0. It does not take into count the cost of the installation or the additional cost of equipment upgrades, associated taxes, permit fees, or the connection charges.

According to Tesla’s website, the total cost of a Powerwall 2.0 and the installation is $11,500.

Factoring in how much a Powerwall can save each month in utility bills, it may be a wise investment.

Installing the Powerwall 2.0 as Part of Solar-Plus-Storage System

If your goal is to install the Powerwall 2.0 as part of a solar plus storage system, it is important to know that battery costs only make up part of the total cost associated. A typical 5-kilowatt solar panel system typically has a cost of $8,500 to $16,000.

This cost is dependent on factors such as where you live and the type of equipment you are looking to use. The cost associated may seem high but it is a worthwhile investment. A solar plus storage system is highly efficient in reducing overall electrical costs. 

The economics involved in whether or not a storage system such as this one is beneficial to you depends on your utility company’s rate structure and your personal reasons for needing solar power. For an individual who is using it to power a vehicle, such as the Tesla, it would be dependent on you to determine your needs outside of powering the vehicle.

How Does Tesla’s Batteries Work?

Electric car manufacturers such as Tesla spend an immense amount of time and money in the development of long-lasting battery technology to power vehicles to drive longer distances before a recharge is necessary.

Tesla’s batteries are designed to work best when they are paired with a home solar panel system. Instead of wasting the electricity that the home cannot use when the solar panels produce more than what the home can use, the excess electricity is stored in the Tesla battery pack. This is opposed to the electricity being sent back to the home’s electrical grid.

In the event that the solar panels do not provide enough electricity to power owners of the Powerwall can draw on the electricity stored in the battery pack instead of having to reach out to a utility company to purchase electricity from them.

Typically, when homes are dependent upon solar power and the solar panels draw more power than what can be used by the home, that excess electricity is “sold back” to the electrical grid. Since most homes with solar power cannot store that excess power, it cannot be used later when the solar panels can’t generate enough electricity.

What this can lead to is an unbalance in the loads on the electrical grid making residential solar power useless in residential neighborhoods on days that are cloudy and at night where there is less solar energy to be absorbed by the panels.

How Does Tesla’s Powerwall Address Unbalanced Electrical Loads?

As mentioned before homes with solar power can generate electricity but they cannot store the excess electricity that is not necessary to power the home. The electrical grid is not capable of storing electricity and the power that is generated is distributed on an as-needed basis throughout the home.

Unbalanced loads on electrical grids typically occur due to solar panels on residential roofs produce the maximum amount of electricity during the late afternoons where the sun is at its highest, producing the most solar energy.

Solar panels are also dependent upon the demand for electricity. During the mornings and late evenings, the demand for electricity is lower so during the times that the sun is lower, less solar energy is generated.

Solar plus storage systems like Tesla’s Powerwall are designed not only to just address these issues but also be able to provide electricity during power outages and storms instead of relying upon a gas-powered electrical generator.

The Economics of Owning a Tesla Powerwall 2.0 Battery System

It has been determined that the Tesla Powerwall 2.0 can be a hefty initial expense that can range anywhere from $8,000 to $20,000 to get the battery pack, get it installed, and setup including any necessary system upgrades you may need.

In order for the Powerwall to be at its most effective you are going to need to invest in a residential solar panel system. The cost of solar panels and their installation can around $20,000 for the average American for a 1,500 square foot home. The cost of the installation of a solar panel system has gone down in recent years, however, this is due to the lower cost in the production of these systems.

It is often argued that Tesla’s Powerwall 2.0 batteries are considered to be a luxury item. Due to generous government subsidiaries, owners of solar-powered battery systems and residential roof solar panels get to enjoy various tax breaks and a reduction in energy costs due to not being dependent on utility energy.

Solar companies also tend to offer very generous incentives as well to help motivate a person to convert over to using solar energy for their home and reduce their upfront costs and bring down their recurring per/kWh electricity costs to below grid prices due to net metering.

The Tesla Powerwall 2.0 Warranty and Life of the Battery

The Tesla Powerwall 2.0 is equipped with a 10-year warranty that is unlimited. This warranty assumes that the battery is being used on a daily basis, constantly charging and being drained. With the warranty, comes a capacity warranty that guarantees that the Powerwall will retain at least 70% of its capacity to hold a charge during the 10 years it is under warranty.

The design of Tesla’s Powerwall 2.0 is very similar to other rechargeable batteries in how it is designed. As time passes by, a rechargeable battery will gradually lose some of its capacity to hold a charge. As the battery is continually charged and drained, the battery will gradually lose its ability to retain a charge.

This is not an indicator of a product flaw within the Powerwall 2.0. Over time, all batteries, whether in a remote, solar-powered, rechargeable AA batteries or car batteries will lose its charge. Due to this fact, Tesla provides the 10-year warranty guaranteeing a Powerwall 2.0’s ability to maintain a minimum charge capacity of 70% during this time.

Tesla Powerwall 2.0 Tips and Takeaways

It’s true. Tesla’s Power 2.0 batteries are not an investment to take lightly. With the possibility of having installation costs upwards of $8,000 to $20,000, it is reasonable for any person to take pause and think prior to making such an investment. Here are some tips and takeaways to consider.

The Biggest Supplier is not Always the Best Supplier

If you can help it, don’t look to purchase a solar battery from a large distributor. They do not usually offer the best deals. When looking for solar power batteries or panels, try looking for a smaller distributor. They offer better pricing and tend to offer a lot of financial incentives.

It Works Best With a Residential Solar Panel Setup

You will get the best value from the Powerwall 2.0 if you have a residential solar power set up in your home. The battery is rechargeable by solar energy and allows for the storage of electricity that the home cannot use. To get the best value out of the Powerwall 2.0 be sure to look into solar power for your home.

To learn more about the economic factors behind the price of the Tesla Powerwall 2.0 battery visit this page on the economics of Tesla batteries. Thanks for reading and we hope this answers your question and helps you in becoming more energy independent without draining your pockets.

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The articles here on are created by Greg, a Tesla vehicle and Tesla solar expert with nearly half a decade of hands-on experience. The information on this site is fact-checked and tested in-person to ensure the best possible level of accuracy.

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