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Saturday, July 13, 2024

Heat Waves and Virtual Power Plants

Like many parts of the world, we're having a heat wave; multiple days with highs over 100°F. Luckily we have air conditioning and, during these high temps, it's been running 14+ hours per day. During a heatwave, as you can imagine, there are millions of AC units sucking down kilowatts and pushing cool air into homes and businesses. All of this AC use puts a strain on the grid and there have been some outages. Our neighbors lost power for about an hour while we were visit them for a Sunday cookout. 

Luckily, the utility was able to restore the power quickly. An hour is not too bad; the house didn't get too hot and nothing in the freezer/refrigerator went bad. As you can see in the image below, as I write this, my local utility has over three thousand customers without power. 

It's impressive that, even during this heatwave, they have better that 99.7% service reliability. But, if you're one of the 0.28% without functional electricity for fans and AC, it doesn't feel impressive. Checking the outages the next day and there were fewer than 100 customers affected, so more than 3000 were back online in less than (maybe much less than) 24 hours.

So how do you help reduce the load on the grid and prevent outages when there's a heat wave and everyone wants to run their AC? Our utility has several demand mitigation schemes and they are using them all this week. 

Demand Response 

The three residential programs our utility has are Peak Rebates, Smart Thermostat, and Virtual Power Plant (VPP). They use these programs when demand is expected to be high or what they refer to as an "Energy Rush Hour." 

Peak Rebates

With is program, the utility notifies you the day before and asks you to reduce your energy use during a 3 or 4 hour window the next day. You then receive rebates based on how much your usage is below your typical usage during that period. You get paid for "Negawatts." The rate is $1 per kWh that you don't use compared to your usual load for that time. So if that's when you usually do dishes, laundry, or charge your EV, moving these to other times of the day could give you some payback and reduce grid stress for everyone.

Smart Thermostat Energy Rush Hour

With this program you can let the utility have the ability to tweak your air conditioner settings. They pre-cool your house before the peak hours so your AC doesn't have to run as much during the high energy demand period. For any month that you participate in a Rush Hour event, you earn $25. 

Virtual Power Plant (VPP) 

Last on our list, and the one I want to spend the most time covering, is the VPP. Echoing the Smart Thermostat naming convention, our utility calls this the Smart Battery Program. To participate in this program, you must have an approved residential energy storage battery such as Tesla Powerwalls. When participating, you allow the utility to discharge your battery when the grid needs the energy most. In return, they pay you $1.70 for each kWh dispatched. You can select your participation level at 30, 50, or 80 percent of the nominal storage capacity of your pack. We're participating at the 80% level.

For the recent heat wave, they dispatched our battery 4 times.

Here's one of the dispatches: 

As you can see, the battery is being dispatched at a rate of 10.8 kW. This rate allowed them discharge 80% of the battery capacity during the 3 hour event. During the 4 event they were able to extract a total of 129.6 kWh. At $1.70 per kWh, that's $220. 

As you can see in the chart above, we used 57 kWh and only exported 32 kWh. The point isn't about how much we used but WHEN we used it. As you can see, we charged the battery at off peak times before 6AM and during the Rush Hour event, from 5PM till 8PM, we were exporting solar and battery energy to the grid. 

The Results

Combining the Energy Rush reward and the VPP payment, we earned $245 for our July electricity bill. We'll likely have a negative bill this month. Not bad for our household, but how'd the local grid over all do during these events? 

As you can see in the graph above, grid load was reduced by 109 Megawatts when the Rush Hour started. 

Sunday, July 7, 2024

Tesla Vehicle Production (Q2'24)

We've been anticipating the year Tesla breaks through the two million vehicle annual production mark for some time.

We first asked the question in 2022. At that time, Giga-Austin and Giga-Berlin were newly opened and had a long way to go to ramp their production to high volume, so the answer was clearly 'No' for that year.   

2023 had a chance of being that milestone 2M year. Our estimates for 2023 ranged from 1.86M to 2.18M. Tesla's actual 2023 production was 1,845,985. This was very close to the low-end of our estimate, but again below the big 2M mark. Macro economic, specifically high interest rates, depressed sales in the second half of 2023 and continued to pull-down the first half of 2024. This is still an open issue for the second half of 2024. 

Tesla has reported production and sales for Q2'24, so now we've got the numbers for the 1H'24 and it looks a lot like 2023. 

Production 2023 2024 Y/Y Delta
Q1 440,808 433,371 -2%
Q2 479,700 410,831 -14%

So far, 2024 is not looking like it will be the magic 2M year either; however, it still has a chance. Giga-Berlin is expanding (despite the astroturf protests) and there are signs that interest rates will be reduced. I want to add a little context around this Q2 result. Yes, it is lower than Q2 last year, but Q2 last year was their best quarter ever and this Q2 is their 3rd best sales quarter ever, so it's far from a failure. In fact, it beat the street's estimates and this is one of the reasons the stock has rallied.  

When we initially estimated 2024 production (here), we had a range of 2.0M to 2.7M. The high end of that range is now off the table. If we stick with the Q3 and Q4 estimates that we currently have, that brings the year in at 1.91 million, just 90 thousand shy of the big 2M milestone.

However, our current estimates for Q3 and Q4'24 are now the more conservative 466k and 490k, respectively (shown in the graph below). That brings a total of 1.83M for this year, about flat to the 1.85 of last year. This result of flat to 2023 would be inline with the "between two growth waves" description that Musk used in the Q2 investors call. 

I must admit that I'd be highly disappointed if Tesla produced or delivered fewer vehicles in 2024 compared to 2023 and I think many other investors would be too. So, I expect Tesla to pull a few demand levers in Q4 to make sure they exceed last year's results, coming in at 1.9M for 2024, but I still have my fingers crossed that maybe, just maybe, they hit 2 million.