Last night, Tesla Motors held a live presentation at Tesla Design Studio in Los Angeles. During the event Tesla Chief Executive Officer Elon Musk and Chief Technology Officer JB Straubel unveiled a new Tesla battery that has home, commercial/industrial, and utility-scale storage applications.
College of Marin will be the first community college in California partnering with Tesla to install the new stationary storage products on campus. Vice President Greg Nelson expects installation to begin in mid-May and last until the end of June. Once the stationary batteries are operational, Nelson estimates the cost savings to be anywhere from $100,000-$150,000 annually for the College.
Greensmith, a hardware agonistic provider of grid-scale energy storage software and integration solutions, also weighed in on the conversation. “Grid-scale energy storage is no longer in the trial stage – it is generating significant revenues for utilities and independent power producers today. For this reason, we expect the grid-scale market for energy storage to dwarf the home energy storage market over the coming decade. Battery innovations are not likely to end anytime soon,” said CEO John Jung. “Which is why we don’t expect there to be rapid convergence on a core battery technology—like we’ve seen with crystalline silicon in solar – in the near future. While lithium-ion batteries like Tesla’s are well-suited for certain energy storage applications, there are many applications where other chemistries might make more sense. No single battery is appropriate for all grid-scale energy storage applications.”
Imergy Power Systems is another grid and residential energy storage provider who makes vanadium-flow batteries from industrial waste. Bill Watkins, CEO of Imergy agress with Jung, saying there are a number of energy storage technologies available to address those specific market requirements and more than enough opportunity for a number of these technologies – and the companies developing them – to succeed. “The problem with Lithium batteries, after a certain number of charge/discharge cycles, the battery gradually begins to wear out, ‘age’ and lose its capacity,” he said. “For homeowners, this means replacing their battery more frequently – and that adds up quickly. One of the advantage of flow batteries is they can be charged and recharged nearly an unlimited number of times without degradation.”
“Cheap cells made in the Gigafactory are only part of the puzzle,” said Dean Frankel of Lux Research. “Unlike electric vehicles, in stationary batteries there is more of a relative cost contribution coming from power electronics, software, and installation. Without more vertical integration – and perhaps even some acquisitions and Gigafactory-like efforts dedicated to inverters – Tesla is limiting its growth potential here.”
The distributed energy storage space already has many players offering standalone and solar-connected battery systems, so Tesla is certainly not the first to market. However, the EV maker does have key product scaling benefits afforded to few of its competitors, through its relationships with Panasonic for lithium-ion cells and SolarCity, the largest residential solar installer.
Still, in order for Tesla to see success, the EV maker must tackle three key areas:
- Cost reduction beyond Li-ion cells. At $350/kWh, Tesla is the industry’s current price leader for stationary Li-ion packs, thanks to its partnership with Panasonic and its upcoming Gigafactory. However, consumers will also need to pay for an inverter, installation, and other costs, which altogether will nearly double the $3,000 price of Tesla’s entry-level Powerwall unit. Tesla will need to push their power electronics and installation partners to cut their costs further – or do that itself, either in-house or via acquisitions.
- Offering financing and new residential business models. Tesla and SolarCity have relied on California’s self-generation incentive program (SGIP) for the majority of its systems to date. However, SGIP is an unsustainable model in the long term. Tesla has to establish new business models beyond residential load shifting, to open up all U.S. and international markets. Moreover, Tesla’s stated goal of selling 30% of its output from the 50 GWh Gigafactory to stationary markets implies about $3.7 billion in revenues in 2020. Providing financing options for many of those purchases will be key, echoing the successful strategy that solar has already employed.
- Working with utilities, not against them. As more distributed solar comes onto the electric grid, utilities are increasingly at odds with consumers and companies like SolarCity. Energy storage can turn distributed generation into a utility asset, but only a few utilities have explored owning and controlling smaller residential and commercial systems. For Tesla to truly impact the stationary market, it will need to work with utilities and grid operators to ensure its solar and storage solution can be a key grid management tool. Its initially announced utility projects – with Southern California Edison and Oncor –are excellent demonstration trials, but just a start; Tesla will need to bring hundreds of more utilities on-board, which will take time and resources.
“Tesla has succeeded in pushing down cell and pack costs for stationary energy storage, which will accelerate this market,” Frankel said. “However, power electronics, installation, and widespread availability of financing remain open questions. The quicker Tesla can build partnerships, make acquisitions, and invest further to address these issues, the better its chance of hitting its hugely ambitious goal of selling 15 GWh of stationary energy storage in 2020.”