Tonight at 8:00pm Pacific, Tesla will unveil its plans to manufacture battery storage for homes, business, and utilities. You can watch here.
The renewable energy industry has been holding its collective breath for a solution to their biggest problem: energy storage.
The last several years have seen solar panel prices drop, solar installations increase, electric vehicle sales rise, and governments and businesses move toward integrating renewable energy into their operations.
All of that has brought clean energy solutions closer to mainstream. So when Elon Musk hinted about an announcement for a new product line for renewable energy storage last week, suddenly, that dream became a step closer to becoming reality.
"It signals that the storage market is at a point where end customers have been looking for big companies to have their product in the market," said Ravi Manghani, an analyst for GTM Research. "It's a small-but-growing [and] very competitive space and Tesla's putting its stake on the market."
Tesla will have a big impact on this conversation and the progression of the energy storage industry, but of course, the announcement can't change the course of history on its own — so don't get too excited. We still need government regulations and changes in utility models, and California remains one of the few states with tangible growth in the renewable energy market and regulations in place to make sure utilities are providing storage capacity — though there is massive growth in the market.
"We expect [the] energy storage market to grow over 10X in the next five years, and in that sense, having a company like Tesla launch products signals that the expected growth is real," Manghani said.
Of the number of customers who deploy solar, those who utilize storage systems makes up a tiny fraction — only 0.2% of those installations had storage attached to them, Manghani said. However, his most recent report for GTM Research about the energy storage market said that the US installed 61.9 megawatts (MW) of energy storage in 2014, and 2015 will be the biggest year yet, with 220 MW installed. GTM Research reports the industry is expected to grow incredibly fast, from 100% to 250% every year.
Drivers of this growth include aging grid infrastructure, growing renewable penetration, high retail electricity prices for end-customers, and backup power for natural disasters and adverse weather events. All these factors have created what seems to be a perfect storm for energy storage, Manghani said. And that means that the old utility model is one step closer to being flipped on its head.
When we generate and store our own energy, it transforms the way we interact with it and changes our consumption patterns. With the current model, consumers who can generate their own power have to sell what they don't need back to the grid because there's no good way to store it. So utility companies can turn the profit on it because they control the storage and transmission.
"Storage gives you the ability to disconnect supply from demand," Manghani said.
For years, Tesla has been working on advancing battery technology. It's part of the secret sauce that has enabled it to leap ahead in building electric vehicles. But, tonight's announcement will be the first major product that's not an automobile. It will make Tesla no longer just a luxury car company, but a battery company.
This isn't a huge surprise considering Tesla's $5 billion investment in its Gigafactory and Musk's close ties with SolarCity where he's the chairman. SolarCity has already started offering home energy storage from its solar panels using Tesla car batteries.
Tesla's Gigafactory in Sparks, Nevada, is supposed to reach its full capacity by 2020 and has a planned annual lithium ion battery production of 35 gigawatt-hours (GWh). The company is working with partners like Panasonic to produce batteries with less cost and waste, and more efficiency. The factory itself is supposed to achieve net zero energy when it's complete.
Recently, Bloomberg reported that Tesla is already working on a pilot program in California for its home battery storage, with about 300 homes and 11 Wal-Marts using them. Cargill is another company that also plans to use the batteries in the near future.
As you follow the announcement, here are the big questions to watch:
- How much will the batteries cost? The Guardian reported the batteries may cost up to $13,000, though Pacific Gas and Electric will offer a 50% rebate for using it and financing is available.
- How much power will they be able to store? Manghani said his estimate would probably be around 4 to 6 kW for the residential batteries, as that is close to the industry standard. The Guardian reported the system offers configurations at 10 and 15 kW.
- Are they trying to create an ecosystem? Will other renewable energy companies and other electric vehicle companies be announced as partners to tap into Tesla's batteries?
- How will this scale and will power companies partner? What renewable energy really needs to become more mainstream in the US is to move beyond California and other progressive areas. Be on the lookout for Musk to talk about plans for the scale of how many batteries Tesla will manufacture to see how big he's thinking. Also, watch to see whether any governments and/or power companies sign on as partners.
Lyndsey Gilpin has nothing to disclose. She doesn't hold investments in the technology companies she covers.
Lyndsey Gilpin is a former Staff Writer for TechRepublic, covering sustainability and entrepreneurship. She's co-author of the book Follow the Geeks.