Quick Thread on V2G
I won't have the time required to do an "energy markets primer" this week, because it will be way too long, so maybe I can chop it into a few separate pieces. Let's start off with a response to some of the V2G predictions from someone in the industry.
I won't have the time required to do an "energy markets primer" this week, because it will be way too long, so maybe I can chop it into a few separate pieces. Let's start off with a response to some of the V2G predictions from someone in the industry.
@NYKChannel and @HyperChangeTV recently put out great videos on the potential for Tesla to offer Vehicle To Grid (V2G) services as a way to generate additional cash flow for Tesla and/or the vehicle owner.
Batteries can do all sorts of interesting and valuable things on the grid, and if the rumors are to be believed, future Tesla vehicles will be capable of providing the same "grid services" as those offered by the Hornsdale project, or other large stationary batteries.
While the tech is capable of providing these services, the energy market structures for a large utility scale project in Australia are nothing at all like what you could receive as a residential utility customer in the US or Europe.
The Hornsdale project for example makes most of its money not by storing energy when prices are low and selling when prices are high, but by offering an "Ancillary Service" called Frequency Regulation. This service helps to ensure that the Australian grid operates at 50 Hz.
This was a major issue for that portion of the Australian grid prior to Tesla's involvement, and the local market structures there enabled Tesla to be paid for solving that problem. In the US however, frequency regulation is not a large dollar source of payments.
There are other ancillary services in the US which do allow for payment in some jurisdictions, such as reactive power, but qualifying for these payments requires a lot of paperwork and legal fees, and is not something any residential customer would pursue.
Therefore, when we talk about batteries, it really is important to split up the sources of revenue potential by the type of customer who will own the battery. Large utilities can and will get paid for ancillary services, subject to their availability within each jursidiction.
But for Commercial, Industrial, and Residential customers, the primary benefit will be in shifting energy usage from high price hours to low price hours. However, even this activity will be dependent on the rate structure of your local utility.
For example, if your utility offered one rate regardless of when you consumed electricity, a battery would provide zero value to you as a customer of that utility. The most common structure is to have some type of "On-Peak" and "Off-Peak" rates, which are at predefined hours.
The difference between these two rates might be $0.05 per kWh. Assuming you could perfectly optimize this difference by fully using a 75 kWh car battery every day of the year, you could have an income stream of $1,369 per year.
In reality, you wouldn't fully drain your full car battery every day, and you may not even be able to take advantage of selling into peak hours if your car is at work. Therefore the potential for V2G in most residential jurisdictions is limited under current market structures.
The chart below shows how hard it is for a single residential customer to access the different value streams which a battery can physically provide to the grid. 
But, what if there was a way to aggregate all the different vehicles out there, and have a utility manage them, and sort through all the necessary paperwork and regulations? This is the idea behind a "Virtual Power Plant" or VPP.
This is nothing new to Tesla, and many utilities have been doing this for years now, by allowing residential customer smart meters to turn off air conditioning units for a short interval during the summer months.
With thousands of customers agreeing to this, the utility can now actually reduce demand at a whim, and thereby use that reduced demand as a mechanism to qualify for capacity payments.
These payments can be split with the customer to provide incentive for participation in the program. Tesla could in theory do the same thing, but it would have to register in many different geographies, and the individual revenue streams for V2G would vary a lot by region.
This is not easy, and it will not be fast. But assuming Tesla does at some point aggregate all those vehicles, it could turn a residential customer into a source for revenue streams in capacity and various ancillary services.
In combination with residential solar, the opportunities for autobidder to provide real value are increased further. I believe this is what @elonmusk was referring to when he described his desire for Tesla to become a "giant, distributed utility".
Ok, so maybe this wasn't a "quick" thread. @threadreaderapp unroll
