• Tesla Reports More Than 100,000 Battery Reservations, Worth $1 Billion
• Batteries Sold Out Through 2016
• Musk Predicts Battery Sales Of 'At Least A Few Billion Dollars' In 2017
When Tesla Motors CEO Elon Musk announced a cheap utility-scale battery this spring, the Tesla Powerpack was seen by some as the solution solar and wind energy have long needed to complement their variable performance.
But that doesn't mean Tesla needs renewables to sell batteries, founder and CEO Elon Musk said Wednesday.
"It seems like people link this too much to renewable energy," Musk said during Tesla's Second Quarter earnings call. "Of course we are great believers in renewable energy, but that is not the gating function for stationary storage."
Ultimately, said Musk, storage allows utilities to turn off power plants or defer new ones.
"You can basically, in principle, shut down half of the world's power plants if you had stationary storage," he said.
Utilities currently have to build power plants to meet peak demand, and then some. Batteries allow utilities to store energy when demand is low and use it when demand is high, without turning on more power plants.
"The fundamental economics of cost are always true, meaning there's always a cost advantage of system-wide implementation of stationary storage because of high peak to trough of electricity usage."
Tesla has received more than 100,000 battery reservations that would be worth more than $1 billion, Musk reported, if they translate to sales.
"These are reservations so reservations may be an order or maybe not," Musk said. "But this is what people say they want."
The company plans to ramp up, produce and sell $40-$50 million in batteries in the Fourth Quarter. Next year it will produce ten times that many, Musk said. And in 2017 sales should amount to another five to ten times more.
"It's probably at least a few billion dollars in 2017," Musk said.
"I do want to bracket this with some degree of uncertainty because this is quite new, and again we've got that challenge of exponential ramp.… The actual numbers in any given quarter could be quite different."
About 70 percent of the reservations have been for the commercial and industrial scale Powerpack, said Chief Technical Officer JB Straubel, and 30 percent for the residential Powerwall.
Yet the Powerwall is doing better than they expected, he said.
The Powerwall makes sense in markets where the price of electricity varies with its cost—cheaper at night, for example, and more expensive during the day, Musk said — "but the Powerpack makes sense everywhere."
Tesla pioneered a new low cost for stationary storage when it announced the Powerpack would have a capital cost of $250/kWh. That brings the battery below the threshold—which one study pegs at $350—at which utilities can not only afford storage, but can save money by using storage to idle power plants and defer other capital costs.
That has market observers speculating about the expected impact of the Tesla Powerpack on the cost of electricity.
"Grid parity is the wrong analogy here," Straubel said, "but it's something to think about."
Grid parity is the point at which the cost of alternative energy is equal to or less than the price of electricity from the grid. For a utility-scale battery, something like grid parity arrives when the capital cost incurred by the utility is offset by the savings it enables.
"At grid parity the market is staggeringly gigantic," Musk said—in the multi-terawatt hour range.
Next post: US Energy Secretary: We Should Worry About Cars Getting Hacked
Previous post: Clean Power Plan To Algae Companies: Prove It
