Tesla planning to triple energy storage in 2018

Jordan Smith
By Jordan Smith
For business

The energy storage market is expanding rapidly around the world, and Tesla hopes to lead the pack with an ambitious plan to grow the amount of megawatt hours of energy it can store with its products in 2018.

“We continue to aim for a three-fold increase in MWh deployed for our energy storage products this year,” Tesla stated in its first quarter earnings letter. The company saw its storage capacity grow by 160 percent during the first quarter, reaching 373 MWh.

Tesla has major projects in the United States and Australia, including a battery storage facility in South Australia holding 129 MWh, a project in New York with Consolidated Edison, and operations in Colorado and California.

In remarks on the conference call for Tesla’s first quarter results, Elon Musk suggested the company may have a gigawatt-scale deal to unveil soon.

Prospects for growth

The power grid in the United States presently has an energy storage capacity of 23 gigawatts, according to the Union of Concerned Scientists. The overwhelming majority of current capacity (96 percent) is made up of hydroelectric storage, which involves pumping water into a reservoir when supply outstrips demand. When demand increases, the water is released to provide energy.

While battery storage is far behind hydro in terms of capacity, technological developments sharply reducing storage costs mean that the outlook for growth in this sector is bright.

The push to develop batteries for the electric vehicle market, in which Tesla plays a leading role, has contributed to lowering production costs. In 2010, the cost to store a kilowatt hour of energy was $1,000 but dropped to $230 by 2016, thanks to improvements in battery technology. This reduction coincided with a rapid growth in energy storage in the U.S., which increased by 65 megawatts in 2014 and 220 megawatts in 2015, McKinsey reported.

Cheaper battery costs give utilities the opportunity to manage the strain on the power grid at peak times. At the same time, customers are increasingly able to adopt so-called behind-the-meter installations, such as storage capacity combined with solar panels to cover their energy needs when the sun isn’t shining.

Since this alternative could rival the provision of power by utilities in certain markets, with Green Tech Media predicting that behind-the-meter generation will be equal to utilities’ power generation by 2022, the companies have an interest in remaining involved in the energy storage business.

Improving reliability

Increasing storage capacity is critical to ensure energy grids operate more reliably, particularly as renewable sources begin to play a greater role in the energy mix. Wind and solar power systems, two of the fastest-growing renewable energy technologies, vary depending on the weather and therefore require a backup system for the periods of time when they cannot generate power.

Even traditional power generation models can benefit from a dependable backstop. Tesla’s 129 MWh battery storage facility in south Australia, for example, was called into action within a matter of milliseconds last year after a nearby coal power plant shut down without warning.

“I think it had quite a profound effect,” Musk said of the battery. “South Australia took a chance on doing the world’s biggest battery, and it’s worked out really well. If you read the articles, it worked out far beyond their expectations because the battery is able to respond at the millisecond level – far faster than any hydrocarbon plant. So, its grid stabilization was much greater actually than even a gas turbine plant, which normally respond quite fast.”

Competition

Other players in the energy market are keen to get in on the act. With $10 billion in planned investments in energy storage by 2035, French energy utility EDF is hoping to emerge as the European leader in the storage market. EDF’s plan aims to create 10 gigawatts of additional energy storage around the world by 2035.

The new storage systems will not necessarily be purchased by customers outright or operate at the grid level. To make energy storage costs more affordable, several companies, including Younicos, Power Edison, and ENGIE Storage, are offering storage rental models.

Tim Grejtak, an analyst with Lux Research, explained that the goal of storage rental is to encourage consumers to enter the market by “lightening the capital expenditure for the customer.” He added that companies in the industry are beginning to use their business model to stand out from the competition, as opposed to placing emphasis on the technology they use.

Tesla also has a presence in the home storage market with its Powerwall business. The company stated in its first quarter letter that purchases of its Powerwall batteries, which retail at just over $5,000 excluding installation costs, are expected to grow significantly this year.

Jordan Smith is an freelance journalist and translator covering issues related to energy, the environment, and politics. His work has appeared on the independent news site Opposing Views and at the Canadian Labour Institute.