Tesla battery storage – sold out, charged up and possibly over-hyped

If you are an Australia householder and you haven’t already got your order in for a Tesla PowerWall battery storage system, you may have to wait a while. Ditto if you operate a business or an electricity grid and you are looking for the larger-scale Tesla Powerpack.
Tesla founder and boss Elon Musk says the company already has $US1 billion worth of sales, and its delivery book to early 2017 is already booked out.
For a product that has not yet been delivered in any capacity, that seems like a remarkable achievement. As Musk himself says, Tesla has only done a a presentation and a webcast and 30 minutes of press questions and answers – no marketing, no advertising, no sales force to speak of.
“Really, we’re not trying to sell it,” he told an analysts briefing last week.
Now, that comment may seem to be a little disingenuous but there is no doubting the impact that Tesla has had on the battery storage market, on its competitors, and the perceptions from households who now believe that cheap storage is just around the corner.
Already, battery storage costs have come down quickly in the last six months, and are likely to fall further in coming years.
Tesla itself is going to start production later this year in some of its facilities, and from 2016 in the new $5 billion “giga-factory” that it is building in Nevada, and may now expand and replicate in Europe, Asia and elsewhere.
Musk is predicting up to $US45 million in stationary storage sales in the fourth quarter of this year, as much as ten times that number in the following year, and ten times again in 2017, meaning a “few billion” in sales in 2017.
“That growth rate is probably going to just, keep going at quite a nutty level,” he said. “It’s probably at least a few billion dollars in 2017, somewhat speculative at this point, but I think that’s likely. So it’s sort of growing by half order of magnitude to an order of magnitude per year.”
Interestingly, 70 per cent of the sales are for the larger Powerpack, the 100kWh systems that would likely be used by businesses or utilities. But that is a function of the fact that those customers are likely to order as many as 100 or 200 of those systems. Indeed, one customer ordered 250 of these systems, which sell for $US25,000 each, or $US250 per kilowatt-hour.
Tesla says it is surprised at how strong demand has been on the retail side. “In terms of unit volume, the Powerwall would be the greatest,” Musk says.
He noted that in countries such as Australia, where there is time of use payment systems, the Powerwall is already making sense to individual consumers cost of delivery is reflected in the cost. Elsewhere, it was a matter of finding value in the system.
“The fundamental economics of cost are always true, meaning that there’s always a cost advantage to someone – to a system-wide implementation of stationary storage, because of the high peak to trough electricity usage.
“So, if you have buffering, which is what stationary storage allows for, then you only need your power plants to operate at the average energy usage, which means that you can basically, in principle, shutdown half of the world’s power plants if you had stationary storage.
“This is independent of renewable energy. It does not matter whether you have solar panels, this is just being able to shut down half of your power plants if you have buffering, because you can then have your power plant output at the average of what is needed by the consumers.”
But he noted, “at grid parity, the market is staggeringly gigantic.”
Not everyone, however, is getting carried away with the Tesla story. Analysts at UBS said they are downgrading Tesla to a sell because it expects the company’s battery storage sales – and its electric vehicle sales – to disappoint.
“The stock has jumped (more than) 40 per cent since the anticipation of the storage announcement; however, our analysis indicates that Tesla’s current planned 15GWs of storage capacity may be larger than the market in 2020,” it says. In other words, capacity may exceed demand.
UBS notes that most of the “orders” are more like solicitations of interest because there were no deposits.
“More importantly, early adopters (“green” consumers) likely are driving up initial orders, but once these orders are filled, making the mass market leap will likely be difficult given the challenging economics,” it says.
Indeed, in the US, where this report was written, the economics of domestic battery storage are not as compelling, because retail electricity prices are relatively low, and solar currently gets a “net tariff”, meaning the same amount as retail prices.
In Australia, though, the economics are powerful, because electricity prices are higher, and the payment made to “exports” back into the grid are low or non-existent. That will provide a big incentive to install battery storage, if anyone can get hold of a Tesla battery. It could be a big opportunity for its competitors, who are starting to match it on price.