From a man who made his name and charted his career with lofty goals and often unexpected financial decisions, the news came with little surprise: Elon Musk, the CEO of Tesla Motors Inc., unveiled a product line of electric batteries late last night in Los Angeles.
Musk introduced the Tesla Powerwall, a wall-mounted lithium-ion electric battery for homes and small businesses, and the Tesla Powerpack, a heftier version of the same core product designed for utility-scale use.
He also announced a new wing of the company, Tesla Energy, which will begin shipping the Powerwall systems to domestic customers in three to four months. Deliveries will trickle out slowly, he said, then accelerate next year when the company begins shipping orders out from its so-called Gigafactory in Nevada.
Yet Musk spoke first about rising emissions and climate change solutions, not cars. He used a slide show of power plants and smoggy skies to introduce the problems. “It sucks, exactly,” he said. “I think we, collectively, should do something about this,” he added, “for us and a lot of other creatures.”
The Powerwall battery charging system, which can be stacked up to nine batteries high and mounted on an inner garage wall or outside, costs $3,000 for a 7-kilowatt-hour system and $3,500 for the 10 kWh option. The entire Powerwall system is roughly 3 feet wide and 4 feet long, and would stick out about 7 inches once mounted. It could easily take a home off the power grid, especially with the use of many solar panels, Musk said.
“Tesla is not just an automotive company, it's an energy innovation company,” the firm said in a statement. “Tesla Energy is a critical step in this mission to enable zero emission power generation.”
The utility version comes in 100 kWh blocks that can be grouped together. Musk said one utility company is already interested in a 250-gigawatt installation of Powerpack systems alone.
Shifting cities to 'stored sunlight'
“This entire night has been powered by batteries,” he told the audience in the warehouse in Hawthorne, Calif., pointing to gray, blocky Powerpack systems standing on end and powering the facility. “Everything you're experiencing is stored sunlight.”
Musk's solution is as audacious as it is simple. By harnessing energy from the sun—“this handy fusion reactor in the sky,” he called it last night—getting enough renewable energy on the power grid and smoothing out energy generation and use between peak and off-peak hours, the nation and planet can shift away from fossil fuels' dominance as a power source, he told the crowd.
The new batteries, he said, will help speed that transition worldwide. “These is going to be a great solution for people in remote parts of the world,” he said, noting that it allows homeowners to leave the power grid and ditch electric cables.
“It can scale globally,” he added, likening the battery systems' potential in emerging economies to mobile phones that penetrated markets faster than old technology and leapfrogged landline sales.
Tesla, the first American car company to go public since Ford Motor Co., has been a darling stock to many in recent years, climbing from trading in the $30 range in 2012 to above $200 a share for most of the past year.
In a research note about yesterday's announcement from Deutsche Bank AG, which was reported by Bloomberg, the authors struck a bullish tone, writing: “Based on the preliminary work on the economics of stationary storage, we believe that this has the potential to be more significant” than Wall Street analysts expect. The battery system, they wrote, could add up to $100 a share.
Karl Brauer, a senior analyst for Kelley Blue Book, said Tesla's new battery division could be even more successful than its car business.
“If Tesla can produce a cost-effective home energy storage system, it could prove far more valuable, and profitable, than anything the company is doing with automobiles,” he said before the announcement.
Brauer, too, alluded to the cord-cutting paradigm phone companies face when customers jettison their landlines for mobile service only. “Imagine a wave of customers cutting ties with their local power companies because they have a self-contained energy system,” he said in an emailed response. “Instead of paying hundreds of dollars every month, consumers could make a one-time payment of a few thousand dollars to power their home for years.”
That power companies face and must adapt to survive within a changing electricity marketplace in the United States during the next decade, he added, is an “undeniable, and likely unavoidable,” reality.
Severin Borenstein, a professor at the University of California, Berkeley's Energy Institute, was skeptical about how much impact the Tesla batteries would have on the renewable electricity market.
“None in the short run,” Borenstein said yesterday. “In the longer run it could, but it's not going to immediately change the market. I think they are looking out years from now. But the technology, I think, still is not ready.”
For power storage at home, “I don't think it's going to get used at a very high scale right now,” he said. “There are a lot of people who will do things as a novelty or as an early adopter.”
A bigger market than that for electric cars?
The electric carmaker began delivering its Model S sedans in 2012, the same year it announced plans for the Model X, a sport-utility vehicle with a crossover-style frame. Construction on the Gigafactory began in 2014.
There are more than 50,000 Tesla vehicles in use, and Tesla delivered over 10,000 more in this year's first quarter. The company has set a goal to deliver 55,000 models this year. Roughly 32,000 went out in 2014.
Reached by phone in Arizona before Musk's big night, Ken Elias, a partner at Maryann Keller & Associates, an automotive industry consultancy, said Tesla's home-charging system could make sense if the costs were low enough.
“The question is really the price point,” he said. “Does it make sense?”
Reliability, battery lifetime, weather damage and installation expenses and challenges, Elias said, are all questions surrounding the battery line. If products like the Powerwall take root, however, they could spur on the solar power industry and lead to more rooftop installations. The possible market for solar panels combined with an at-home battery is significantly bigger than Tesla's car brand is tapping into now, he said.
“The bigger story is: How big a business and market is this going to be?” Elias said. “If they work really well, I think it could make a lot of sense.”
In the U.S. auto market, plug-in electric cars make up less than 1 percent of the pool of the roughly 250 million vehicles in America. And on a different technological track, hydrogen-powered fuel-cell cars—powered by devices Musk has publicly called “fools cells”—are beginning to enter the market, led by Japanese automakers.
“The cheaper batteries get, the less viable fuel cells are,” Levi Tillemann, a fellow at the New America Foundation and electric vehicle expert, said yesterday afternoon. But, he added, fuel cells and batteries are “not necessarily an either-or proposition.”
Before the presentation began last night, a simple message greeted the crowd watching the event online: “THE MISSING PIECE,” it read, above a white box with rounded edges.
That shiny, white product, which turned out to be the Powerwall, will be a great addition to Tesla, said Tillemann, the author of a “The Great Race: The Global Quest for the Car of the Future,” due out this year.
Reporter Anne Mulkern contributed.
Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500