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Will Tesla disrupt the electric utility industry?

Posting in Technology
Tesla Motors' all-electric luxury car—along with the company's fast-charging network—has been called a game changer for the auto industry. But what about the electric utility industry? 

Morgan Stanley analyst Adam Jonas thinks it will. In a note to investors, Jonas doubled the firm's  projected price for the stock from $153 to $320, citing the potential for Tesla to disrupt industries outside of its automotive niche, reported Bloomberg. The price hike is linked largely to expectations that Tesla CEO Elon Musk will reveal details this week on his plan to build a gigafactory battery plant that aims to lower the cost of battery cells.

Jonas wrote in the investor note entitled "Nikola’s Revenge: TSLA’s New Path of Disruption:" 
Tesla's quest to disrupt a trillion $ car industry offers an adjacent opportunity to disrupt a trillion $ electric utility industry. If it can be a leader in commercializing battery packs, investors may never look at Tesla the same way again.
During the company's fourth-quarter earnings call last week, Musk confirmed plans to build a massive lithium-ion battery factory. Although the details were few and far between, Musk did say that plans were in the works to integrate precursor material, cell, module and pack production into one massive facility. 

Jonas argues the cell production from the battery plant has the potential to double Tesla's share of the global car market. If Tesla can become the world's low-cost producer in energy storage, the company could disrupt adjacent industries, according to Jonas.

The Morgan Stanley investment note argues Tesla cars—370,000 of which will be produced annually by 2020—could act as a mobile energy storage fleet. In the note, he asks and then answers, "Does Tesla make high-performance automobiles, or a mobile fleet of electrical grid storage? Technically, both." 

Morgan Stanley calculates that the roughly 40,000 units of Tesla cars on U.S. roads contain 3.3 GWh of storage capacity. equal to 0.3 percent of U.S. electrical production capacity and 14 percent of total U.S. grid storage including pumped hydro. By 2028, the firm estimates Tesla's 3.9 million units in North America will have an energy storage capacity of 237 GW (and 384 GW globally), equal to 22 percent of today's U.S. production capacity and nearly 10 times larger than the entirety of U.S. grid storage that exists today.

There are questions and plenty of uncertainty in this rosy picture. For one, how capable is Tesla of producing battery cells? 

Thumbnail photo: Tesla Motors

— By on February 25, 2014, 10:22 AM PST

Kirsten Korosec

Contributing Editor

Kirsten Korosec has written for Technology Review, Marketing News, The Hill, BNET and Bloomberg News. She holds a degree from Northwestern University's Medill School of Journalism. She is based in Tucson, Arizona. Follow her on Twitter. Disclosure