An analyst’s view of Tesla’s upcoming stationary storage announcement

Long term, Tesla's plan could have a "positive environmental impact," but where an EV owner charges their Model S from still makes a big difference, says Cosmin Laslau of Lux Research. Image: Tesla Motors.
Elon Musk, CEO Tesla Motors, founder of Paypal, of Space X, closely linked with US residential solar market leader, SolarCity, and apparently part inspiration behind Robert Downey Jr’s turn as Iron Man in the recent movies, has also become the most famous man in energy storage in the past few weeks.

The hotly anticipated announcement tomorrow of two products in the company’s stationary storage range, teased and trailed by a series of cryptic and not-so-cryptic tweets and interview snippets, has lead to mainstream media taking an interest in the stationary storage sector and what it could offer like no other news we’ve heard to date. And there hasn’t even been any actual news yet.

So I’d like to preface this interview by saying that firstly, I think this is great news for this sector and hopefully, long term, for the planet. I’d also like to say that, of course, I did try to go to the source on this one.

Speaking onstage at Energy Storage Europe in Germany earlier this year, Greg Callman, head of grid integration and stationary storage at the company was at pains to repeatedly point out that the company is looking in the near future to shed its veil of mystery around a lot of its activities in energy storage and put out an open call for collaboration and information sharing, a conversation with the rest of the nascent distributed storage industry.

Callman hasn’t answered my emails, neither has Tesla’s press department. The media coverage I have come across so far hasn’t referred to any of these conversations taking place either, at least not publicly. So, to make sense of what little has been made public so far, I spoke to energy storage expert Cosmin Laslau at Lux Research, who took me through some of the observations – and speculation – that he felt was most interesting about the forthcoming news.

For the record, Musk has tweeted:

For the future to be good, we need electric transport, solar power and (of course) … pic.twitter.com/8mwVWukQDL

— Elon Musk (@elonmusk) April 29, 2015

 

So, firstly, what are we really expecting tomorrow? We know it’ll definitely be a stationary storage product for homes and another for grid-scale energy storage. As seen in their pilot programmes with SolarCity, those of us in the industry have seen Tesla quietly doing this, at least the smaller scale installations, at pilot level for some time.

We don’t think there’s going to be a massive surprise coming with this announcement. The fundamentals: Tesla’s got those pretty much locked in. It’s going to use cylindrical form factor, lithium-ion batteries, the cathode chemistry is nickel cobalt aluminium. The supplier is Panasonic.

Long term, things are going to be coming out of the Gigafactory in Nevada and they’re targeting the residential market that’s going to be probably a battery pack that’s about 5kWh to 10kWh in size, then something much larger in the order of 100s of kilowatt hours.

In terms of the technical fundamentals, it’s pretty locked in place. There’s not a battery breakthrough here that is coming. They’ve already previewed this to the market. What could be exciting about this announcement is that they could say that initial prototype has gone well and they’re ready to make this available for anybody who wants to buy it.

That’s on the technical side. What I’m really intrigued by, how this announcement could move the needle, is what they might do in terms of the business model associated with these partnerships, the vertical integration.

The different pieces that fit together here sometimes don’t fit together very well [at present]. So if you want to get a pretty advanced set of installations for your home, you have to get SolarCity panels, Tesla for the batteries, Google and Nest for your smart thermostat, the utility for your interconnection - the list goes on and on.

Can you make it easier for the customer, can it be more integrated, could it be financed in a really attractive way? I think these are some of the really interesting ways that Tesla could try and move the needle on this announcement.

“

"Tesla could be in one of the strongest positions in the energy storage world to offer a large number of customers to finance energy storage and kind of spur adoption in a way that we haven’t seen before."
Cosmin Laslau, Lux Research.

According to Elon Musk, much of his motivation behind projects including Space X has been driven by social and environmental concerns. Image: Space X.
What kind of innovations might be possible in terms of these business models?

One thing that we’ve been tracking over the past year or two with great interest is people offering financing for energy storage. Companies like Stem, Green Charge Networks have raised about US$150 million between them. That money is dedicated to them approaching potential customers…[offering a no-money-down deal]…and then over the course of 10, 15 years making a profit of these batteries by enabling clever ways to use them.

Tesla could be in one of the strongest positions in the energy storage world to offer a large number of customers to finance energy storage and kind of spur adoption in a way that we haven’t seen before.

You said the form factor is likely to remain cylindrical like their car batteries?

Our understanding with the Gigafactory is that they’re investing a lot of scale of money and R&D efforts and truly optimising their cylindrical form factor. So it’s not going to stay exactly the same as we’ve seen in the original cars and the original stationary deployments. They’re going to make that a little bit taller and wider, a slightly larger version of the cylindricals we already know from them.

What’s really driving a lot of the cost reduction, associated with the Gigafactory and what makes Tesla/Panasonic a cost leader within energy storage is that they’ve applied this form factor across everything they do, so if they were to now switch from cylindrical to some other form factor with the stationary batteries only it would really hit them on the costs.

I’ve also heard that to date Tesla has been clever in sizing their batteries. So it can be really modular and go from one battery in a house to various sizes of commercial installations. Could that help with Tesla’s strategy for scaling up?

That’s definitely one of the key paths going forward where you have modulars that you can fit together to make the order size that you want to deploy. The choices that they’ve made have given them a lot of flexibility.

I would also mention that when we look at the different cost metrics around energy storage, we typically break it down into dollar per kWh. Panasonic and Tesla are really cost leaders within energy storage. So they have the best ability out of anybody out there, to push stationary energy storage if not lithium-ion batteries to a new lower price point.

That being said, all that is coming from the cell and the pack. When we look at the integration of these systems into a home or into commercial installation, grid installation, there’s the aspect of power electronics, your wiring, inverters, interconnection that Tesla don’t really have direct control over.

Elon Musk has obviously made money, with Paypal, Tesla and so on. So he seems to have the business side down but he’s often said Tesla, SolarCity, Space X and Paypal to some extent are things he’s become involved with to help society. What could the environmental impact of this kind of scaling up of energy storage be?

I think the long term trends here are positive. There’s a lot of things to be worked out. Where are you charging your car from? What’s the electricity mix like?

Is it renewables, versus dirty coal, and so forth? So I think that’s something that needs to be worked out and still hasn’t. The other thing is, at the moment lithium-ion batteries aren’t really being recycled. If you look at lead acid, the value chain, there’s nearly 100% recycling that happens there. In the next five to 10 years you’ll see a lot of work done in that direction [for Li-Ion batteries].

Yes, long term there could be a good environmental impact but there’s still a lot of things that could trip us up as we go in that direction.

“

"I think the long term trends here are positive. There’s a lot of things to be worked out. Where are you charging your car from? What’s the electricity mix like?…Yes, long term there could be a good environmental impact but there’s still a lot of things that could trip us up as we go in that direction."