Climate Change Demands More from Tesla’s Energy Storage Technology
Will Tesla develop cost-effective energy storage solutions to support renewable energy in the fight against climate change?
As climate change becomes increasingly problematic, the interest and investment in cleaner energy systems such as solar and wind technology increases; however, these renewable energy sources present a number of barriers to adoption. Renewables’ price difference in comparison to conventional energy, difficulty of integration into the existing grid infrastructure, and intermittency issues alienate energy consumers and utility companies [1]. Tesla’s battery storage technology, originally developed for its electric vehicles, provides a solution to make renewable energy more reliable [2] and has the potential to lead to easier integration with conventional energy grids.
Elon Musk, the CEO of Tesla, has stated that his company’s vision is to be an energy innovation company that strives to reduce the world’s reliance on fossil fuels. He began with the development of electrical vehicles and has expanded the business to include energy storage and solar energy technology [3]. With regards to storage, Tesla has created a lithium-ion battery called Powerpack, and a household lithium-ion battery called Powerwall [4]. These batteries can store energy when wind and solar power is producing at high output and provide energy when renewable energy sources are producing at low or no output, solving the issue of intermittency for utility companies and households. These applications are simply the beginning, as Tesla has plans for expansion and the development of a clean energy grid utilizing its storage technology.
Short Term Growth Plan
In the past year, Tesla has opened a Gigafactory to produce batteries for both its electric vehicles and energy storage products. By 2018, it plans for the Gigafactory to produce 35 gigawatt-hours of annual production. The increase in local production capability allows Tesla to deploy its energy storage technology more rapidly in the United States as demand for renewable energy increases [5]. It also has the potential to catalyze more adoption of renewable energy systems with easily accessible storage.
Additionally, Tesla recently agreed to build the largest lithium-ion battery in South Australia to support their local power grid. The battery will store enough energy to power 30,000 homes and prevent the power shortages previously encountered in the region [6]. As more countries install renewable energy and more governments incentivize the use of renewable energy, the demand for these large batteries is likely to increase. This application will also prove that battery storage is capable of supporting a large-scale renewable energy grid reliably.
Long Term Projections
The next step for Tesla in energy storage is to aggregate its existing technology for larger applications in utility networks globally. Bundling of the Tesla batteries is planned to develop a cleaner energy grid, where customers can both use and distribute power from their household Powerwall batteries to the grid’s Powerpack batteries. Tesla has formed a partnership with Green Mountain Power in Vermont to pilot this program. It will install 2,000 Powerwall batteries in households and projects that energy costs will be lower for the consumer as a result. Tesla plans to expand these partnerships globally in the long term with utility companies, grid operators, and energy retailers [4].
Improvements to Achieve Widespread Adoption
The largest limitation of energy storage technology is the cost. Last year, it was projected that Tesla would sell $500 million in batteries and achieved well below the target because the cost is inaccessible for many potential customers. In 2015, batteries were utilized by only 450 U.S. homeowners, 250 U.S commercial property owners, and 24 utility projects, showing that there is a large opportunity for expansion [7]. Tesla should invest more money in research and development to drive the cost of batteries down more rapidly and engender broader use of battery storage. This will allow for less reliance on government support for adoption of renewable energy.
Key Questions
As climate change continues to threaten our environment, Tesla will need to address a number of questions to adequately support the deployment of cleaner energy solutions. These two questions are of primary concern:
- How will Tesla make energy storage more affordable and accessible? Will it adopt different energy storage technology to achieve this goal?
- Will Tesla’s aggregation of its energy storage technologies create a clean grid that is easily integrated into the conventional energy grid? Is it essential to achieve this compatibility?
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Citations:
[1]Chinie, A. C. (2014). CURRENT CONCERNS AND TRENDS IN THE BUSINESS OF RENEWABLE ENERGY. Management Research and Practice, 6(4), 5-22. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1635393619?accountid=11311
[2] Hybrid cars: Tesla opens world’s largest battery storage facility with utility company(2017). Chatham: Newstex. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1863916177?accountid=11311
[3] Richtel, M. (2016, Jul 25). Tesla’s chief sticks to mission despite a series of setbacks. New York Times Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1806393803?accountid=11311
[4] The Next Step in Energy Storage: Aggregation. Tesla.com. Retrieved from https://www.tesla.com/blog/next-step-in-energy-storage-aggregation
[5] Tesla: 80 megawatt-hour battery installation “is just the tip of the iceberg”. (2017, Jan 31). University Wire Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1863406841?accountid=11311
[6] Sanderson, H. (2017). Tesla to build giant battery to provide power to 30,000 homes. FT.Com, Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1926398045?accountid=11311
[7] Sweet, C. (2016, Aug 08). Elon musk has big hopes for storage batteries, but the market is small; tesla and SolarCity have foothold in the business, which has been slow to catch on. Wall Street Journal (Online) Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1809735758?accountid=11311
Image: Cooke, L. (2017, Feb 01). Tesla just unveiled the world’s largest battery storage plant. Inhabitat. Retrieved from https://inhabitat.com/tesla-just-unveiled-the-worlds-largest-battery-storage-plant/
I completely agree that the overall issue facing Tesla is price. People around the world (debatably in the US) seem to be embracing renewables, but monetizing their embrace has been difficult. Tesla needs to show that their system will save money to ensure large scale adoption. Two issues that are slowing the economic progress of the household battery are regional differences in how electricity is sold, and the variability of li-ion battery raw materials. The United States contains both regulated and deregulated markets that differ in the ability of an individual to sell power back to the grid. Even if Tesla could decrease the cost of their batteries they still need to push regulators to establish an environment to promote a smarter grid that contains small scale batteries. Second, the price of cobalt, a main raw material has increased nearly 200% since July of 2016. Hopefully people will increasingly pressure politicians to create the regulations needed to support a power grid with integrated storage capacity. As Tesla produces more batteries and demand increases for Cobalt, supply will become increasingly stable and prices will decrease. Once those two things happen, Tesla will have a sound argument for the average American household to adopt these batteries.
While Tesla is a leader in providing battery technology, it may have to be more transparent and proactive about mitigating its own carbon footprint. As an illustration, a recent Swedish study found that the manufacture of a Tesla kWh battery emits 17.5t of CO2. [1] Although the report’s findings and assumptions are open to challenge, the fact remains that Tesla’s manufacture is not currently carbon neutral. In light of the larger objective to reduce carbon emissions in fighting climate change, does Tesla get a “free pass” for not directly addressing the carbon footprint of its own processes?
Probably not. One way the company could address this concern: Tesla could conduct a carbon audit of its production processes and associate carbon costs with specific products. Even simple transparency in allocating and disclosing emissions impact could change consumer behavior and even improve demand for Tesla. For example, the Energy Star labeling scheme has by some accounts reduced US carbon emissions by 150M metric tons over a decade. [2] Similarly, Tesla’s adoption of a label system could drive consumer’s decisions and, as other companies enter the market, provide an early differentiator that preserves its incumbent advantage. While a short-term cost, measuring and disclosing the carbon impact of its product lines could be an investment in strengthening Tesla’s position.
[1] Rob Bushway, “New Study: Large CO2 Emissions From Batteries Of Electric Cars,” Climate Depot, June 2017, http://www.climatedepot.com/2017/06/12/new-study-large-co2-emissions-from-batteries-of-electric-cars/, accessed December 1
[2] Mark A. Cohen and Michael P. Vandenbergh, “The Potential Role of Carbon Labeling in a Green Economy,” Resources fro the Future, April 2012 http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-DP-12-09.pdf, accessed December 1
Question: How will Tesla make energy storage more affordable and accessible? Will it adopt different energy storage technology to achieve this goal?
The adoption of renewable energy by the average consumer on a large scale is one of the biggest hurdles facing the renewables space. The challenge is two-fold- educating consumers on the use of renewables and the impact on cost savings while simultaneously working with energy providers to introduce renewables into the energy grid. To answer your first question, I believe Tesla will have to work on pushing down the price of renewables. This is particularly challenging as SRose stated, the price of raw materials used in renewables has been increasing. I believe they can mitigate this variability in cost by working with regulators to manage the price of these materials int he use of renewables. In the meantime, I believe Tesla can work on capitalizing the ‘conscious consumer’ brand and create marketing to move consumer behavior into this space.
A very timely topic with Tesla’s delivery just yesterday of the large-scale battery storage unit to Australia that you mention! [1] I see this issue as the biggest hindrance to the future of renewable energy. The fact is, at this point renewable energy can only supply up to a certain threshold of the energy needs of a country given the variability in supply of solar and wind energy. Without storage, fossil fuel infrastructure must still be maintained and kept running in order to provide supply at times when renewables are not producing.
This business line should be one of Tesla’s key areas of focus not just as a way to promote climate change and improve its electric vehicles, but also as a way to diversify its business. Battery technology is applicable outside of the energy space in essentially every electronic device, and the Company should look for new industry verticals in which to enter.
[1] https://www.nytimes.com/2017/11/30/world/australia/elon-musk-south-australia-battery.html