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Tesla — Running with scissors?
Jerry Hirsch wrote a very compelling article on the imminent Tesla Motors announcement of its expansion into battery-based energy storage for both residential and commercial customers to store power. Tesla will collect $65MM in state incentives for its pilot projects under a portion of the PUC's self-Generation Incentive Program. Wal-Mart will participate in the test programs and expects to purchase more Tesla battery systems. Elon Musk is Chairman of SolarCity.
The gist of the battery projects is, that the storage of electricity efficiently, inexpensively and safely has been a problem since Ben Franklin's stormy kite and key experiment and the eventual harnessing of electricity. The implications of new storage technology for bolstering the electricity grid and reducing pollution from producing energy are immense and exciting.
Hirsch gives the example of homeowners and businesses charging batteries at night when rates are cheap and then using the power during the day when loads are heavier and rates are the highest. It appears that Tesla's grand strategy is to develop partners such as Panasonic's Battery Division and others to leverage a $5BB investment into a massive lithium-ion battery 'Gigafactory' near Reno, NV.
Hirsch writes that the huge increase in solar and wind-generated power is increasing the need for effective, efficient electrical storage systems, in order to optimize the almost limitless capacity to generate power through these sustainable means. It appears to be the next frontier in renewable energy. But is it?
Certainly, the risks are high. Musk has proven to be quite a risk-taker, but his results have proven solid. It's important research, to be sure and all of my research on all levels of the solar industry points up development of battery storage and personal micro-grids are necessary to achieve any true environmental impact at the Global level.
BMW and other automakers have also launched battery storage pilot programs in California, but not nearly on this scale. Microgrid projects are projected to grow to $19.9BB by 2020, from $4.3BB in 2013.
Are battery storage and microgrid solutions truly the next frontier in the renewable industry? What barriers are there to successful storage of solar power and how long can it safely be stored? With new technologies, there are so many endless questions and not many ready solutions. And without the financial wherewithal to weather the costs of entering this market, many brilliant minds will be denied entry by the barrier of the expense of R&D.
The LA Times’ Jerry Hirsch commented on the ‘interesting’ first-quarter loss of $154 million ($49.8 million the previous year), as revenue rose 51% to nearly $940 million. While the outlook for the Vehicle Division is rosy in Q2, with production of 12,500 vehicles, 12% over Q1 and the company expects to deliver 55,000 this year.
However . . . Elon Musk is a high stakes gambler. Several financial people are more than a bit troubled by the huge risks Musk is taking with their cash reserves (i.e., building the huge Reno Battery ‘GigaFactory’ and his SpaceX foray, both of which are costly gambles. One Analyst noted, that it’s a large gamble for a company that’s never been profitable. Also, looking ahead, it will take the battery factory years to return on investment. Add to that, their Model 3 ($35k) model won’t be available for years. So—the $64 Billion question: Will Tesla run out of money before these other projects pay off?
Well—as of May 11, Robert Walton reports in Utility Dive, that interest in the PowerWall, the rechargeable lithium-ion battery for the home and utility-scale system is so strong that Tesla is considering boosting output by 50%. A strong positive? Yes. But, we must also take into account that the Gigafactory isn’t expected to be completely online until 2016 or 2017, so we’re still in a gambler’s mode, based on future profits.
News could be even brighter in regard to the Utility-sized PowerPack product. Tesla is already in talks with one utility for a 250MW installation using only PowerPack, which, in itself would exceed the estimated 220MW of energy storage expected across the entire US in 2015 (GTM Research).
Writer Davide Savenije believes that the most significant partnership in the battery conversation is still the partnership with SolarCity, one unheralded in recent news. The goal is for SolarCity to deliver Tesla batteries with every installation by 2020; rolling out the batteries with its GridLogic microgrid service as well as its DemandLogic energy management system for business and institutional customers.
High-stakes gamble? Like Tesla, SpaceX and the bullet train, California gets a reputation for fruits, nuts and wild ideas. But, once again, great advances can only be made when entrepreneurs and dreamers take bold risks to move technology forward. We'll have to watch and wait for the Gigafactory's results. Will this change energy storage history, or will these bold moves send shareholders 'running to Urgent Care?’