Tesla Set To Ride Worldwide Wave Of Energy Storage Business
Elon Musk has had a good couple of weeks as the Tesla (NASDAQ:TSLA) stock price has shown recently. Very strong Q3 auto sales are expected to continue into Q4. Musk’s talk about his Mars colonization plans, though typically highly ambitious, were well-received by all but the usual Tesla Musk bears. Recent commercial storage orders have been less emphasized but represent further strong gains for the company.
Those writers who criticize Musk’s vertical integration model for new energy products are either hooked up with the fossil fuel industry or fail to understand the way the world is going. Chinese manufacturer BYD Company (OTCPK:BYDDY) have already gone a long way down that road, and have been very successful accordingly. They have just launched a new energy storage system in Europe using lithium iron-phosphate batteries.
Tesla is now consolidating its vertically integrated new energy systems. This will tie in their interests in electric vehicles (EV’s), rooftop solar and energy storage systems. Success is coming remarkably quickly now in their energy storage business. This is happening as the Gigafactory production ramps up and approvals are received. There is a huge market appearing rapidly for cost-effective energy storage which can overcome the mismatch between renewable energy supply and energy demand.
In September the California Public Utilities Commission awarded the world’s largest lithium ion battery storage project to Tesla. The company will provide a 20 MW/80 MWh Powerpack system at the Southern California Edison Mira Loma substation. This was necessitated by a huge and polluting rupture in the Aliso Canyon natural gas reservoir. 15 million residents were potentially affected.
Apart from the ground-breaking nature of such a huge energy storage contract, the award also showed something crucial about the Gigafactory. Tesla is confident it can handle such a sizeable order in a period of just 3 months to take care of both the manufacture and commissioning of the system. Those Tesla bears who have scorned the Gigafactory’s readiness to manufacture to a large scale have been proved wrong, again. It also shows that Tesla can produce the product competitively, something else the bears have said they could not. Cheaper raw materials, a shorter supply chain and factory automation will radically drive down Tesla’s battery prices over the next few years.
In fact, the order exemplifies another Musk specialty, doing things in an entirely new way to others. The Gigafactory is operating on a unique Just In Time construction process. Under this manufacturing is going along in parallel with construction of the actual facility. Pictured below is part of the battery production area now up and running.
By 2018 the facility should have the capacity to produce a startling 35 GW hours of all battery storage products. The original goal was for this to be achieved only by 2020.
This contract represents just the tip of the iceberg for the industry as a whole. Already this year California had awarded contracts to AES Corp and Alta Gas Ltd for similar projects. The state is targeting an installed base of 1325 MW by 2020.
The good news did not end in the Alsio Canyon. At the end of September Tesla was awarded a contract by an Orange County water utility. The Irvine Ranch water utility awarded the contract to Advanced Microgrid Solutions who will incorporate 7MW/34MWh of Tesla batteries. This is the largest such installation at any public water utility in the USA.