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Tesla charges ahead at the grid storage market

For years Tesla, in partnership with solar partner SolarCity, has been experimenting with selling batteries that can store energy locally at a building, or combined with a solar panel. I was one of the first to report on this, and an early stage of the companies’ program, which had recruited 500 customers (including Walmart), faced hurdles when it came to working with utilities to get the batteries connected to the power grid.

But last year when news emerged that Tesla planned a huge battery factory, and intended to dedicate a portion of its batteries to this market called “stationary storage,” even more speculation emerged around how truly disruptive Tesla could be for the power grid. While lithium-ion batteries have long been considered too expensive to provide low-cost storage for the grid, Tesla has said that in conjunction with Panasonic via the battery factory, it could cut the cost of standard lithium-ion batteries (the kind found in your laptop) by a third. That could be a game-changer for the grid.

Construction of Tesla's gigafactory is underway.
Construction of Tesla’s gigafactory is underway.

Now in the electric car maker’s most recent earnings call this week, Tesla showed just how far along the company has actually come towards selling batteries for the power grid market. Tesla CEO Elon Musk said on the call that Tesla has already been “bidding on a lot of RFPs [request for proposals],” for utilities looking to build energy storage projects.

Utilities, particularly in California, have begun to look into building out big battery banks that can store energy and help them better manage their grids. Battery banks can help smooth out clean energy, which only provides power when the sun shines or the wind blows. For example, batteries built next to a solar farm could store the solar energy during the day to be used later at night.

Batteries can also help utilities avoid building new “peaker” power plants, which are basically expensive and dirty power plants that are used to push energy onto the grid when it’s really needed, like a hot summer day when everyone turns on their air conditioning. In the near term batteries are already providing services to the grid, through something called frequency regulation.

Tesla Motors

California is the leader in this energy storage market because the state has a mandate that says the three large utilities need to have over 1 GW of energy storage on the grid by 2020. Utility Southern California Edison has already said it will buy 250 MW of energy storage systems, including a huge 100 MW battery plant from AES Energy Storage and a 85 MW contract from startup Stem.

It’s pretty interesting that Tesla would now seek to work with utilities, considering Tesla and SolarCity originally faced considerable pushback from utilities during their early trials of their distributed batteries. But on the earnings call, Tesla CTO JB Straubel said “there’s a lot of utilities working in this space, and we’re talking to almost all of them. It’s early stage stuff and a lot of these projects are really far out.”

Tesla owners take a ride in the new Tesla "D" model electric sedan after Elon Musk, CEO of Tesla, unveiled the dual engine chassis of the new Tesla 'D' model, a faster and all-wheel-drive version of the Model S electric sedan, at the Hawthorne Airport October 09, 2014 in Hawthorne, California. (Photo by Kevork Djansezian/Getty Images)
Tesla owners take a ride in the new Tesla “D” model electric sedan after Elon Musk, CEO of Tesla, unveiled the dual engine chassis of the new Tesla ‘D’ model, a faster and all-wheel-drive version of the Model S electric sedan, at the Hawthorne Airport October 09, 2014 in Hawthorne, California. (Photo by Kevork Djansezian/Getty Images)

Given that Tesla’s battery factory won’t be producing at scale (and at that lower price point) until 2020 after starting in 2016, I think it might miss this first California utility storage window. However, Straubel said “the procurement for these cycles is really long. But this is a business that is certainly gaining an increasing amount of our attention.”

Tesla isn’t just looking at utilities as new customers. Musk also said that Tesla plans to unveil a “Tesla home battery,” or  “consumer battery,” in the next month or two. That battery — likely an iteration of the one it’s been trialling with customers already — will be for use in people’s houses or businesses, said Musk.

Musk described the battery as “really great,” and something he’s “really excited about.” He noted that the design of that battery is already done, and will go into production in 6 months or so.

It’s reasonable to think that an electric car company could come to dominate the grid energy storage market. Earlier this week, I moderated a panel at the Department of Energy’s ARPA-E conference on energy storage, and on it EPRI’s Mark Duvall said that he has long believed that an automotive company would be the winner in the grid storage space. Because space, weight and cost are so constrained and limited on a car, car battery companies are intensely focused on optimizing batteries for these metrics.

8 Responses to “Tesla charges ahead at the grid storage market”

  1. Musk also said that Tesla plans to unveil a “Tesla home battery,” or “consumer battery,” in the next month or two.

    can’t wait to go off-grid !!