This year, the company is attempting to push solutions for the home and the grid.
Elon Musk has long insisted that Tesla Inc. is more than just a carmaker. Now that vision, which for years has taken a back seat to the challenges of vehicle production, is coming into focus. In 2022, Musk’s electric auto company is making a serious effort to become a more important supplier of energy storage, both for people’s homes and for the power grid writ large.
“Over time, we think the demand for stationary storage is going to be at least as high as the demand for vehicles,” Musk said during the company’s annual shareholder meeting in October.
In households, Tesla is angling for comparisons to Apple Inc.’s hardware ecosystem, which tends to push people who’ve already bought in to buy more. Lots of customers already have the trifecta of key Tesla products: an electric car in the driveway, solar panels or a Tesla Solar Roof up above, and a home battery called the Powerwall in the garage (or maybe rigged up outside). “Tesla’s core concept is to make the house as energy-independent and self-reliant as possible,” says Pol Lezcano, an analyst for BloombergNEF, Bloomberg LP’s primary research service on the energy transition. “The idea is to have a Tesla-powered home.”
This combo platter tends to arrive in courses. Electric cars have long been the gateway to solar, because charging a car means a serious upswing in household electric bills, and over time solar can help defray those costs. In October, Musk estimated that a two-car home that swapped both its gas vehicles for EVs would see its power needs double. And Tesla forces customers who pay the requisite tens of thousands of dollars for its solar gear to buy a Powerwall, too. So far the company has installed more than 250,000 of them around the world.
This year, Tesla’s macro projects are poised to gain ground, too. Battery storage for renewable energy is an attractive option for utilities, which are under pressure to reduce greenhouse gas emissions from coal and natural gas. In the San Francisco Bay Area, PG&E Corp. and Tesla have built the 182.5-megawatt Elkhorn Battery Energy Storage System, located at the utility’s substation near Monterey Bay. When it comes online later this year, it will be among the largest such utility-owned systems on Earth, capable of powering an estimated 136,500 homes for several hours.
Tesla’s utility-scale battery product is a modular system called the Megapack, which, according to the company’s website, starts at about $1.4 million for a 0.8MW battery the size of a shipping container. The Elkhorn system is using a bunch of them. Musk’s team is building a factory to begin mass-producing Megapacks in Lathrop, in California’s Central Valley. (Yes, they’re calling it the Megafactory.)
At the nexus of home and grid is a Tesla pilot program for a so-called Virtual Power Plant, which allows customers of California’s three largest utilities to dispatch their electricity back to the grid when demand is high. Tesla participants to date own a combined 42MW of batteries, according to the California Public Utilities Commission—enough juice for about 31,500 homes. In Texas the company recently won approval to sell electricity directly to consumers and is building an energy trading team that will pitch batteries to wholesalers.
Tesla will have a lot of challenges to navigate. A dearth of battery cells and a tight labor market for qualified electricians have repeatedly delayed its ambitions in the energy industry. The company faces fierce competition from large industrial conglomerates as well as established rooftop solar and battery installers such as Sunrun Inc.Leaders of its energy division rarely stay for long, which can compound delays.
And new bosses must contend with Musk’s fixation on Tesla’s Solar Roof, shingle-size pieces of textured glass with photovoltaic cells inside. The Solar Roof looks cool and is popular with customers, but it remains expensive and difficult to install, more than five years after Musk’s demo models helped persuade Tesla shareholders to agree to a $2 billion buyout of a solar panel installer called SolarCity. The deal was rife with conflicts—Musk was SolarCity’s chairman and largest shareholder, and his cousins ran its day-to-day business—and has become the subject of a Tesla shareholder lawsuit. (Musk has said he recused himself from the deal, but court filings indicate he remained actively involved, even advocating for it directly with bankers and investors.)
None of this appears to have given the true believers much pause. During the trial over the SolarCity acquisition last summer, Antonio Gracias, an early Tesla investor and former board member, testified to a Delaware Chancery Court that the company hasn’t swerved from an early plan to remake the very way the world produces energy. “My view was that Tesla was going to be the GE of the 21st century,” he said. “We’ve been on that road ever since.”