Tesla makes itself the center of the energy-storage universe

By David Ferris | 05/06/2015 09:02 AM EDT

The experts who watched Tesla’s announcement of its battery last week noticed two things that may forever change the trajectory of energy storage: They’re cheap, and they’re hip.

The experts who watched Tesla’s announcement of its new batteries last week noticed two things that may forever change the trajectory of energy storage: They’re cheap, and they’re hip.

Tesla Energy, as the company’s new division is called, will sell batteries for the home for as little as $3,000, though the installed price may end up being double that. And the company did something that no one has been able to do — put batteries in a sleek package that lit up Twitter and Facebook and got regular people excited at the prospect of having a battery in the home.

The consequences for other companies in the energy storage space are profound. With one announcement, experts said, Tesla’s batteries have become the price point that customers seek, with specs against which other designs are compared. Competitors can compare or contrast themselves with Tesla, but they can’t ignore it.


"As I go and talk to investors, everybody’s asking the question of ‘how are you going to be competing with Tesla?’" said Sam Jaffe, the CEO of Cygnus Energy Storage, a startup in Colorado. "Technically, we’re not, but they’re the 800-pound gorilla, and they’re throwing their weight around."

Tesla’s batteries are intended for homes, businesses and the power grid, and are meant to be coupled with solar power. This is Tesla’s sweet spot. Tesla, the leading electric-car company, is creating the world’s largest battery factory, called the Gigafactory, in the Nevada desert and is closely allied with SolarCity, the country’s largest installer of solar panels.

As with electric cars, Tesla appears to be achieving in the young field of energy storage a level of scale and name recognition that stand out in a market that barely exists. That dominance poses risks for Tesla and the energy-storage industry. But experts said that Tesla’s aggressive moves are likely to accelerate the demand for energy storage, which will benefit every set of players in the industry — with some exceptions.

"I don’t think anyone stands to lose," said Haresh Kamath, an energy-storage program manager at the Electric Power Research Institute, "because a huge part of the population had no idea that this product could exist until now."

An outsized impact

Tesla introduced its new home battery, called Powerwall, at a glitzy event in California on Thursday. Two versions are available: a 7-kilowatt-hour version for $3,000 and a 10-kWh version for $3,500. The price, however, doesn’t include installation, certain power electronics or the inverter that enables it to harmonize with solar panels. SolarCity is offering Tesla’s battery system to homeowners for more than $7,000.

The larger version is intended to keep the lights on during blackouts, and the smaller is for "daily cycle applications." Tesla also announced a larger battery, the Powerpack, a 100-kWh tower intended for businesses and to feed the power grid. Tesla said that both battery sets can be "stacked" to meet any scale of power need.

The company applied the same attention to design and style that it did to its Model S sedan. With sharp corners and a raised spine, it looks like a wall-mounted computer mouse designed by Apple, or the breastplate from a sci-fi action movie.

Kamath said the Powerwall carries echoes of Apple’s debut of the iPad in 2010. Battery systems for the home had been created before, but "it wasn’t something that was a conversation piece, or charismatic," Kamath said. "It’s very interesting to have a company [Tesla] who is interested in doing this from a design standpoint."

The iPad’s instant popularity, fueled by Apple’s already strong reputation, created a new category of products into which other companies hurried to compete. Kamath and others said they expected the same trajectory in energy storage.

The next months may see a rush of announcements from other energy-storage companies that have been waiting to see what Tesla would do, "so they could shine in the reflected light," Kamath said.

The basking seems to be starting already.

"In a bizarre way, it’s fantastic," said Paul Detering, the CEO of Coda Energy, a provider of energy-storage systems to business and industry. "It’s why I’m so crazy busy. Elon Musk [the CEO of Tesla], with his millions of dollars and tweets, in one short month has done more than anything in history to help people understand that this is a market and that it’s cost effective."

Tesla’s announcement, while splashy, was vague in its details, leaving executives like Detering wondering at Tesla’s intentions. Tesla’s Powerpack may be a competitor to an enterprise like Coda — or it might not.

The competition to providers of commercial and industrial batteries may come not directly from Tesla but from its sister company, SolarCity, which has a growing presence in commercial buildings. SolarCity was founded by Musk’s cousins, Lyndon and Peter Rive, and Musk serves as chairman.

Or Tesla, with a huge volume of batteries that are scheduled to start production next year, could wind up as a supplier. Detering said that he would use Tesla batteries if the price were right.

Tesla’s uncertain position — as patron, competitor or supplier — is repeated for Cygnus, a brand-new startup. Jaffe, its founder, said the company is planning to sell batteries, about the same size as the Powerwall, that would sit on the electricity distribution grid, with the electric utility as customers. Like Detering at Coda, Jaffe said that Tesla’s presence could only help, especially since he is operating in a market that Tesla hasn’t targeted. The fate of Tesla is now tied, for better or worse, to the fortunes of an entire industry.

"I hope they’re successful," Jaffe said. "The worst thing for us would be if they fell flat on their face."

The price of success

Tesla’s emerging role as the leader in stationary energy storage is curiously similar to its role in electric vehicles. In that market, Tesla’s sales and name recognition have been so dominant that the company has taken steps to encourage others to catch up.

As of April, Tesla has this year sold 6,400 units of its Model S sedan, leading the Nissan Leaf, with 5,638. It has sold more than twice as many cars as the BMW i3 and the Chevy Volt.

Tesla’s potential chokehold on the young field of energy storage was apparently on Musk’s mind last week as he strode the stage in a taupe blazer. After asserting that the Gigafactory would be the first of many, he indicated that Tesla would like some company.

"There will need to be many gigafactories in the future," Musk said. "This isn’t something we think that Tesla will do alone. There will be other companies building Gigafactory-class operations of their own, and we hope they do."

He added that Tesla won’t be taking pains to protect the intellectual property behind the Gigafactory, or its new stationary batteries. That echoed his announcement, in mid-2014, that the company would cease defending its patents, including for its electric-vehicle technology, partly in order to hurry other automakers into a market where Tesla had a runaway lead.

Tesla "can’t be the only name in the game," said Jaffe, who until recently worked as an industry analyst. "This needs to become a mature product in a mature market, which means you’re going to have multiple suppliers. There’s no chance that every battery pack in the world is going to be Tesla branded."

Who stands to lose?

With Tesla’s higher profile, one set of players in energy storage is under threat: the pioneers who are making energy-storage systems made from something other than lithium-ion.

"The real losers here are the advanced chemistries that are trying to get into the marketplace and that aren’t suited to the home," said Dean Frankel, an energy-storage analyst at Lux Research. "All these developers are now at a disadvantage."

Lithium-ion is the battery chemistry of choice for both electric cars and for mobile electronics, and are cheap and abundant. Tesla’s batteries are lithium-ion units made by Panasonic. The worry, Frankel said, is that the world could get locked in on lithium-ion before alternatives have the chance to prove themselves.

As a sign of how worried those developers are, one, Imergy Power Systems, a maker of so-called flow batteries, issued a pre-emptive email to media outlets a day before Tesla’s debut, with reminders that the market is young and asserting that Imergy’s batteries could compete with lithium-ion on both price and duration.

A wide range of companies are exploring approaches to energy storage that are well-suited to uses on the electric grid, capable of releasing large quantities of electricity for hours. They include EOS Energy Storage, Aquion Energy and Ambri, as well as Imergy and others.

In 2014, 90 percent of proposed energy-storage systems that were in the pipeline were using li-ion technology, Frankel said. With those numbers, makers of other battery chemistries are targeting their efforts at above four hours’ duration, a realm where lithium-ion has a hard time competing.