Tesla’s Energy Storage Potential: An Underestimated Asset
Tesla (NASDAQ:TSLA) is well placed to reap the benefits of rapid moves towards energy storage in a new renewables environment. The Trump Administration’s withdrawal for the Paris Accords is effectively being ignored by the rest of the world.
My article in March outlined the company’s potential strengths and opportunities. Since then Tesla’s offerings have started to be ramped up by the company. There is little doubt about the potential but also little doubt that this will be a competitive market. For instance a similarly vertically integrated company, BYD Co Ltd (OTCPK:BYDDY), is already making inroads in this area and other Chinese companies may be fierce competitors.
Developments in the US
It is no coincidence that at the Stockholders Meeting this week, Elon Musk focused on the total energy storage offering.
As he referred in his address:
“The beginning of the transition of Tesla to a fully integrated sustainable energy company where you have solar creating energy, then the stationary battery pack, the “Powerwall” and “Powerpack”storing the energy and then that energy being used in the electric vehicle.”
All these applications can be linked together now for the consumer by a mobile phone app.
Doubters have considered that there will not be demand for homeowners to install big expensive batteries in their residences. In the past net metering had meant this was largely the case. If a homeowner saved energy during the day through, say, solar panels, this could be sent back to the grid and therefore there was no point in storing it via an expensive battery.
However utilities in the US are now starting to offer deals to compensate for energy storage. Batteries will start to be used not just for back-up power but will allow for integration with utilities.
Rental is one way this may happen. In a recent deal, Tesla partnered with Green Mountain Power in Vermont. The Tesla “Powerwall” battery will be rented rather than bought outright. The Tesla “Powerpacks” will be installed on the utility’s land and provide an effective back-up to consumers in a process Tesla call “aggregation.” Various other combined services will be offered by Green Mountain Power and Tesla. The network of batteries is aimed to deliver capacity when it is needed, and make the grid more stable. This will lower costs for customers.
Another new development for Tesla was announced in May. This involves a partnership with major agribusiness supplier Limoneira. Tesla’s battery storage systems will be put on trial at Limoneira’s six solar installations.
One problem with the system in the US has been the lack of co-operation between the approximately 3,000 utilities around the country. These have been focused just on their own customers. Connecting regional grids to iron out surpluses or shortages would need a federal lead which is lacking.
In 2016 the US built about 260MW of energy storage. That figure is expected to increase to 478 MW in 2017.
Other companies such as Sunpower (NASDAQ:SPWR) are working on similar ideas to Tesla. They are predicting that solar panels together with battery storage systems will become commonplace. There is little doubt that public opinion is behind this.
As one might expect younger Americans, the home owners of the future, feel most strongly about this.
When Tesla’s Gigafactory in Nevada in partnership with Panasonic (OTCPK:PCRFY) is completed, the company will be the world’s second largest manufacturer of lithium ion batteries after LG Chem (OTC:LGCEY).