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.
Will Tesla disrupt the electric utility industry?
— By Kirsten Korosec on February 25, 2014, 10:22 AM PST
For Utilities, Tesla Is The Perfect Storm
For the last few generations, Utilities have been ever more pervasive in our lives doing everything they can to increase both their market share and their profits by making us ever more dependent upon them. Now with low cost Solar (of all flavors) self-generation becoming available to the masses along with the ability to use batteries to store that energy. Now mankind is on the cusp of transitioning from living as an energy slave completely dependent upon their Utilities to provide all their energy needs to becoming energy independent with no expensive energy bills after their initial payback period!
Tesla has proven that Renewables and especially Solar (of all flavors) are now so cool that they are becoming much more mainstream, as in, "What took you so long to embrace going Green?"
Thankfully we are no longer seeing the many variations of "weirdo tree hugger" labels being used to describe all those that now are adopting Green technology, something which in the past, has also slowed down the shift in the marketplace from various forms of energy generation that ever more ratepayers now realize are dirty as compared to Clean Green and/or Renewable energy.
A great example from our own past, is how the "Ice Men" that delivered and sold block ice for ice boxes tried to pooh-pooh the refrigerator when it was first introduced; now looking back, we can clearly see that it was all just a ploy to protect their market share, in the face of a fundamental change in the marketplace that made their own industry obsolete.
Big Nuclear is now suffering major market share loses because Fukushima has proven that nuclear can go BAD and when it does for any reason, it can affect a Countries economy, if not the health of the entire Planet. After Nuclear, both Big Coal and Big Oil are next in line because they too have huge health issues surrounding their usage. Soon even Big Gas will be faced with the same fate as Big Nuclear, Big Oil, Big Coal and all those Ice Men of Old, because Big Solar is not only here to stay, but is replacing an ever greater amount of what used to be their market share day by day!
This is why we are now seeing so many forward looking US Utilities establishing very long term contracts for solar energy they themselves provide, in the hopes that they can extend their business as far into the future as they can, in order to protect their market share for as long as possible. This may help the Big Utilities in the short term but as ever more ratepayers add their own solar generating capacity, I foresee these same Utilities beginning to shuttering their own generation assets in the next few decades because their capacity is either no long needed and/or it simply cannot compete against modern clean Solar, whose ever increasing efficiency and decreasing cost make owning it a no brainer.
I see a far more intriguing question: How does he calculate 370,000 Tesla cars on the road by 2020 when Tesla's current production capacity is a mere 20,000/year which would only add up to 120,000 cars on the road? Tesla would need to more than triple output to reach that goal. At the moment, they're working at maximum speed and still have a 6-week lag time between order and delivery.
By the way, since Morgan Stanley was one of the underwriters of Tesla's IPO do you figure they might have a bias? Pump and dump baby pump and dump.
A good reason not to invest with Morgan Stanley. Various V2G schemes have been thoroughly investigated at many levels. The conclusions are always the same, it's nonsense.
As others have already commented the battery has a fixed number of charge cycles in it's lifetime. Given that the revenue returned would be quite small, why would the owner of a $100,000 car even consider reducing the life of their battery pack?
But the bigger issue is control. To even be remotely useful, the grid connected cars would need to be geographically co-located with their charge/discharge cycles controlled from a single point.
MS future sales projections for Tesla are laughable at best and not supported by any compelling investigations.
As for the much hyped "Giga Factory" one might want to seriously read the peer reviewed studies from Carnegie Mellon on the cost down curves from large scale Li Ion production. There already exists a tremendous amount of automated production worldwide. Remaining cost reductions will be driven by materials pricing not automation. And with this in mind future costs could rise not fall. It's also difficult to see how US labor costs could compete with those in South Korea and China.
In considering battery storage for renewables one would almost immediately eliminate Li Ion from consideration. Chinese made Pb Acid batteries can be had for a fraction of the cost and are far more forgiving in a utility environment.
Another borderline ignorant 'scare' story, full of extrapolation, if's and holes..
The Morgan Stanley note should say invest in electricity utilities, not Tesla, as if any of this comes to pass, it's kerching time with the unprecedented rise is electricity supply needed.
Smart Planet Journalism/Humanities Degree holders, I implore you to get hold of a copy of Ben Goldacre's Bad Science - it will transform your life, and make SmartPlanet a better place for everyone.
"There are questions and plenty of uncertainty in this rosy picture. For one, how capable is Tesla of producing battery cells? " - How about SmartPlanet going to see Elon Musk/Tesla, for an interview, and tour of the factory ?
A battery made affordable enough not only for less expensive cars but also for consumer home use does make home solar more practical and more capable of removing home solar installations from the grid entirely leaving electric utilities with fewer customers.
Eventually any subsidies now going to solar will need to be transitioned to electric utilities as utility customers remove themselves from the grid and the utility's cash flow.
that is ridiculous, the utility industries must constantly adjust to changes in dynamics and demand; suddenly they are unable to achieve this basic ability of success?
The electricity has to come from somewhere in the first place, like a coal- or gas-fired electricity plants. Rather than "disrupt," this should thrill utilities with sales potential. If the car industry ever does truly go electric - and perhaps Tesla's battery production ramp-up is a step in that direction - then the world will need far more juice than it's ever produced. Sounds like an argument for low CO2 generation like nuclear and renewables. Maybe that's the "disruptive" part? ...
This is silly. Using your car as "mobile energy storage" makes about as much sense as using your toilet as a cistern. Yes, it would prove quite useful in an emergency, but as an integrated solution it would be highly inefficient and you wouldn't want to rely upon this on a daily basis.
Consider this: The very expensive batteries in your $100,000 Tesla have a finite life, largely determined by how many charge and discharge cycles you put it through. Using your very expensive Tesla batteries to make up for the inherent daily deficiencies of wind and solar would highly accelerate their demise, and the depreciation of your very expensive car.
Me thinks the availability of lithium and other materials needed in battery production will play a big part in this. Hopefully Mr. Musk is investing in research into alternate materials, too.
"Does Tesla make high-performance automobiles, or a mobile fleet of electrical grid storage? Technically, both." Hmm....
"Big Nuclear is now suffering major market share loses because Fukushima has proven that nuclear can go BAD and when it does for any reason, it can affect a Countries economy, if not the health of the entire Planet."
It has - see Japan's balance of payments about-turn since they Mothballed their nuclear plants
More money needed to build another factory, over and above Giga battery factories and thousands of Supercharger stations.
With all the promises, Tesla will bankrupt even Elon Musk, as they can't fund all this on their current earnings.
@EVdeath You seem to be overlooking some serious points in your argument--not the least of which is that "peer reviewed studies (sp) from Carnegie Mellon ...". Oh, I agree that there's a fair amount of automated production world wide--which means that a manufacturer like Tesla has to pay somebody for those batteries in packs and modules that may not fit their designs and need to be re-worked in a separate factory to fit design demands. By bringing the manufacture of the batteries, the modules and the overall packs under one roof, they save money and by doing it themselves, they pay only what it really costs to produce--without the overhead of some other company's profits.
Lithium batteries are also far safer than any other kind because, since they do not generate electricity on their own, they have no liquids in them such as acids or alkalines and as such don't risk leakage, corrosion and poisons. Sure, those "Chinese made Pb Acid batteries" are cheaper, but if they need to be replaced more frequently, do you really balance cost over usable life? Acid-based batteries are almost guaranteed to a 5-year or less lifespan, especially if they're deep-cycle batteries. Since lithium batteries are in reality little more than capacitors, they're MADE for deep-cycle work and can last much, much longer.
@EVdeath Here in Texas, we have net metering.
I don't think many people will want to charge their batteries at retail electric prices and discharge them back at the wholesale rate.
@EVdeath Material cost is a variable factor. One which makes the argument for using hydrogen as a more viable storage solution now that the capital costs associated with the manufacture of electrolysis equipment is falling dramatically. The reduction in the cost of hydrogen generating equipment has already lowered the cost of hydrogen and the price of hydrogen will only continue to fall to its lowest level where the price will remain stable. Forever and without any potential for price manipulation.
Unfortunately, most cars are idle during the evening when people are not at work, not doing school run, not shopping etc. Unless you have yet further storage batteries at home, your solar installation will not help you much here charging your Tesla. It being night n'all.
@markhalper When I was considering getting an EV, my license plate was going to say "COAL PWRD", which literally would have been the case.
@JohnMcGrew I think you have that backwards, John. You make the claim of "inherent daily deficiencies of wind and solar" as though these aren't being addressed separately. Most wind farms are placed where winds are constant and reasonably steady. Solar farms are placed where the sun is constant and CERTAINLY steady. It's the other sources of electrical energy that need to be examined as they burn through their fuel sources. It's the ICE that's headed for an early demise, not the electric motor. At a minimum, the ICE will run out of fuel long before the electric motor is stopped.
@Pixel_Dude Not a problem with lithium availability. The US has the world's fifth-largest lithium mine currently in operation with more sites yet untapped. Above that, it seems Bolivia may have the world's largest accessible reservoir of lithium, which is at least in this hemisphere.
The extrapolation is woefully wrong, as Kirsten has obviously done no research, even on the home site of SmartPlanet, as part of Tesla's reported expansion into the hundred of thansands of units production was into a cheaper/lighter more affordable car which will have lower battery requirements - not having to haul the hulk of a Model S Sports Sedan about.
@Neil Postlethwaite: Reminds me of my consistent arguments with a commenter named "Ruggles" on another site.
Any time you start a new operation from scratch, you have to pump all your earnings back into the company to build its infrastructure, you can NOT start taking out profits right away. Considering that Tesla earned over $2Billion last year, I'd say current earnings were pretty good for a 'startup', even if they didn't fully balance outlay. Tesla will be doing this same thing for a few years yet as they get their initial charging infrastructure built and add to their production capacity--which includes this Gigafactory for batteries.
However, once that initial outlay--all that development and building of infrastructure--is completed, costs almost fall through the floor, allowing the company to realize massive profits without changing prices and decent profits by either upgrading the end product or reducing prices to make them more appealing. You can't look at a business day-to-day or even week-to-week and say, "This isn't working, we need to change things." This is one reason why things went downhill so rapidly in the '70s and '80s; in fact, we're still seeing it today. Change takes months and even years to realize truly visible results and if you knee-jerk a reaction because there's an early slight downturn, you may sacrifice the huge gain that could have come from letting it run its course.
Tesla is planning for the long run. They've proved their concept is sound and they've proved people will buy it even at this currently high price--in fact, I saw one in a little town called Hockessin, Delaware just last night as it turned a corner past me. Now they need to ramp up production and finish at least their initial Supercharger network to allow unlimited range, at which point they can slow down certain aspects of their expansion and focus on building vehicles people want and are willing to pay for.
Good point Kevin, but even with equal pricing even the best V2G schemes can produce only a couple of hundred dollars each year.
I mostly agree with your post. Having worked with electrolyzers for over a decade I really want them to succeed. And they're getting close but there's a lot left to do in the areas of efficiency, costs reduction and reliability.
Merchant hydrogen is indeed getting less expensive but this is more a factor of greatly improved methane steam reformation than anything else. I've driven over 30,000 miles testing prototype FC vehicles. Hopefully, with many OEMs launching models in 2015, they will be successful. Then we shall see if a retail hydrogen program can become successful.
I suspect that with increased demand for Li it will react like any other commodity and go up, not down in price.
@Neil Postlethwaite On the other hand, since those cars are idle at a time when electric demand is relatively low, they can charge without stressing the system and, if sitting unused during the day, feed some of that back into the line to help absorb a surge in demand.
@JohnMcGrew @markhalper The CO2 emissions from refineries alone in 2001 was estimated to be 222 million tonnes, which was 11% of industrial emissions at the time. Oil refineries reducing production due to us switching to EV's is where the real benefit will be.
@JohnMcGrew @markhalper Yes! Good one John. And Tesla could call its next model the Anthracite! I also tend to agree with your earlier comment in this stream in which you debunk the notion of using cars as energy storage. I've never really understood it, for a variety of reasons. You make a good point about battery wear-and-tear.
In addition: When would a car be free to feed the grid? Mostly at night, just when the grid doesn't need it, right? It's the wind energy problem all over again. Why would anyone feed the grid during the day, and deprive themselves of battery power later; they would just be exacerbating the "range anxiety" that already worries them, wouldn't they? From a U.S. perspective, it's also hard to imagine getting Americans to give up anything, even stored electricity, associated with their precious cars. Unless, of course, you pay them and then oops, up goes the cost of electricity to the grid and thus to other consumers. Which leads me to another point: It all seems like an inefficient and costly way of storing electricity, like some Rube Goldberg machine. Unless the answer is in the incredibly sophisticated smart grid network technologies and business models that would make it all work, I think it's best that we focus on building cleaner electricity sources like alternative nuclear and renewables.
I'm in favor of electric cars. Bring on better batteries. Go Elon Musk, and everyone else working on them. But the world needs to develop low CO2 energy to send their way. http://www.smartplanet.com/blog/bulletin/wreck-the-environment-drive-an-electric-car/
This issue has nothing to do with the viability of EVs. (which I support, btw) It's just another silly argument thrown out there by the mindless evangelists who will glom onto absolutely anything they think supports the cause.
@Neil Postlethwaite Where are they going to pare the weight? I note that they claim the Model E will be less expensive but I also note that they plan to offer the same overall range as the Model S, if not more.
Most of the weight savings will obviously come from using lighter materials, like cloth instead of leather and perhaps smaller tires, more aluminum, etc. But the vast majority of the weight will remain the battery pack, which if Tesla plans to set up battery-swap stations will still need to use the same packs as the Model S.
No, part of the cost savings will be the simple fact that the battery pack itself will cost less and maybe become more efficient at storing and releasing energy. They may be able to save some weight by shortening the wheelbase a bit and reducing front and rear overhang. However, I don't see that saving all that much weight overall.
You haven't seen one of Tesla's Superchargers, have you? Why do you assume $1M a pop when it's nothing more than a post sticking out of the ground connected to 440V 3-phase AC? I'd say even $1K a pop is high.
Personally, I think you're reading too much into what I said; I never mentioned profits of any kind, I only mentioned revenue. No conflation, I was simply trying to make the point that all the money that comes in has to go right back out to build the business and that traditionally it takes several years at a minimum before you even start to see profits. It doesn't matter where that revenue comes from, whether it be from sales, subsidies, credits or whatever, it all goes into the same pot to give the company money to keep moving forward--while admittedly relying on more investments and partnerships to stay ahead of debt.
In other words, as long as their income from all sources at least comes close to expenses from all debtors, they'll have the time to finish their initial infrastructure phase and reduce costs--which will result in the beginning of profits.
@Vulpinemac Also consider that Tesla doesn't actually make money from selling the cars, but from the "EV Credits" it's allowed to sell to other car companies for the right to continue selling ICE cars that people actually want to buy in states such as California. If California were to change their credit-swap law, Tesla would be decimated.
I think you are conflating sales/revenue with income/profit. $2bn (ish) revenue, generated < $100m profit, though the figures are a bit variable subject to GAAP/non-GAAP interpretation from what I have found. Some even say loss.
As you say "finish at least their supercharger network" - These can't be any less than $1m a pop. If you go for say a rather lowly 500 across the world, that's $500m capital before you start, and the on-going cost of the electricity too, providing no revenue other than new car sales.
@EVdeath Which may be why Tesla is considering Nevada for the location of its Megafactory--practically next door to the US's largest operating Lithium mine. Who knows? Maybe Musk owns that mine, too--or plans to buy it.
@Neil Postlethwaite @Vulpinemac I'm not going to deny that my discussion is speculative--this whole article is speculation, as is your own argument. We don't know, we're guessing based on different observations. Even your own argument is "wildly speculative and naively extrapolated" because of the simple fact that it's going to take a lot more than a mere 370,000 electric cars to "flip the power grid on it's (sp) head." Especially when you consider how many millions of cars are sold every single year.
4.9m Tesla's charging overnight will flip the power grid on it's head. even if you take the wildly speculative and naievely extrapolated figures with a massive pinch of salt, it's a huge change in electricity profile (normally low usage over night) and will need huge increases in (stored Hydro) energy storage, as Kristin correctly says, or will just be stoking up traditional power plants over night to charge your eco EV-cars.
@Vulpinemac @JohnMcGrew @markhalper Whole-house generators are nothing new. I know many people with them. And most are not on million-dollar homes. They are permanently installed outside the home, and most run off propane or natural gas lines if available. If running off a natural gas line, the fuel supply is virtually unlimited. CO2 poisoning is not an issue.
I would certainly own one of these long before I'd own a 6-figure car.
@JohnMcGrew @markhalper "So if I owned a Tesla, it might be cool to be able to rely upon it's battery storage to power my house in an emergency. But then again, if I was wealthy enough to own a 6-figure automobile, it would also mean that I was more than wealthy enough to own a home backup generator, which in addition to being relatively inexpensive compared to a replacement battery for a Tesla, would also be a much better and economical solution to the problem."
Really? While I'll grant it might give you energy for longer, this assumes you have a sufficient supply of fuel on hand for a minimum of 24 hours of operation (dangerous and would you believe illegal in some communities?) You would suffer the risk of carbon monoxide poisoning (dangerous--can happen if there's the slightest leak in the exhaust system AND could be dangerous if the exhaust is on the windward side of the home near an open door or window). There are hazards you have to be aware of with a generator that simply do not exist with an energy storage system.
Ok, I'm NOT saying that using your car's battery is a perfect system--it's not. BUT, for a short-term event of a few hours the car can be the better supply for multiple reasons. No fuel or fumes to worry about in the first place, plus the fact that a simple switchover circuit could have the car automatically power critical circuits in the house for communications and light--such as one single room. Forget the kitchen appliances--they're huge power hogs in the long run, though not nearly as bad as they used to be. Unless it's natural gas fueled, a stove and oven would suck all the capacity of your generator OR a car. Your fridge can hold temperatures fairly stable for hours even with power cut off and your freezer will last even longer--as long as you don't open them.
Which means the only real power you may need are for your lights and maybe rechargers for your phones and computing. An EV's battery should be able to handle one room (fluorescent or LED lamps) and those battery-electronic devices for at least a day and if conditions are really THAT bad, you could always evacuate to a friend's or family's place that is unaffected before the car's battery is depleted.
And no, just because someone may own a $65,000 car doesn't mean they're going to have a million-dollar house with all the amenities (such as an automated generator backup). I live in a community of $200K-$250K homes and see quite a few very expensive vehicles--many in the same price range as a Tesla; they don't have backup generators. These homes? Townhouses and Carriage houses. A few single-family houses. You simply can't make the assumption that because someone owns an expensive car that they're "rich" and own an expensive house as well.
"While we're at it, why don't we collect the billions of AAA,AA,C,D,9V and other types of cells that are disposed of annually...?"
Why? Because as a society we have become conceited, lazy and wasteful. We ignore instructions because "we know better". Next time you buy a pack of those batteries, look at the packaging--in fact, look at the battery itself. You'll find one simple instruction that is ignored by 99.999% of society: "Do Not Dispose In Trash."
You're making an assumption about how a car's battery pack may be repurposed and recycled. You're making an assumption about the cost and effort required to do so. You're doing the same thing mankind has done with every other earthly resource we've used up to this date--assumed that such resources are unlimited. Or worse, simply didn't care that one day those resources would be used up to the extent that production using that resource would be impossible. Very probably you will never experience the final effects of that attitude and that may well be why you DON'T care, but as more than one scientist has said in just this last century, "Mankind has to get off of this rock before it destroys itself." We're in the process of destroying ourselves right now and that process will never fully stop. At least by getting off this rock and colonizing other worlds we slow that process down. But that's another argument.
These 'batteries' used in the Tesla and other vehicles have resources that can be recovered and re-used. They contain Lithium, Aluminum and even plastics that can be re-processed into new batteries or even some different product with completely different purposes and by recovering already-processed resources we actually save on the energy to refine them in the first place. In other words, it's already been proven that, "the energy required to collect, repurpose, and then eventually dispose of these batteries..." is significantly less than that required to mine, transport and refine the original ores simply because there is so much less waste in the process.
In the UK, which Mark will know, batteries are required/supposed to be collected to be recycled under the EU WEEE regulations. If for no other reason, they leach into the environment - though a landfill is full of lord knows what other shite.
Most retailers and council tips have battery collection bins.
@markhalper @JohnMcGrew I think it's out there because the evangelists for this technology are willing to glom onto practically any wild idea that makes any of it sound good without going to the trouble of any critical thinking.
So if I owned a Tesla, it might be cool to be able to rely upon it's battery storage to power my house in an emergency. But then again, if I was wealthy enough to own a 6-figure automobile, it would also mean that I was more than wealthy enough to own a home backup generator, which in addition to being relatively inexpensive compared to a replacement battery for a Tesla, would also be a much better and economical solution to the problem.
Other than that, subsidizing a "green" smart-grid by allowing the utilities to beat up my Tesla battery is sheer insanity, unless they were willing to underwrite replacing the battery every 3 years, which I seriously doubt would make much sense for anyone economically.
@riverat1 @markhalper @JohnMcGrew But even that would be highly expensive and inefficient. My guess is that the energy required to collect, repurpose, and then eventually dispose of these batteries would far exceed that saved in the first place.
While we're at it, why don't we collect the billions of AAA,AA,C,D,9V and other types of cells that are disposed of annually, and yet have a fair amount of charge left in them that goes to waste? Makes about as much sense.
@markhalper @JohnMcGrew As John has pointed out the batteries in cars have a limited useful life. I've heard when they drop to about 80% of their original capacity it's time to replace them. But the batteries removed from cars still have 80% left and installing them in stationary grid storage devices would probably double their lifetime before it's time to recycle them. I would think they need to drop below 50% capacity at least before they're no longer useful for anything.
"Except that the wind does not blow all the time," -- In some places it does.
"the sun does not shine at night," -- which is why you use energy storage systems. As far as that goes, you seem unaware of certain solar generating systems that use "molten salt" as the energy transfer method which can generate electricity all through a typical sunless night as the salts store the heat which is used to power the turbines. The sunlight is used to re-heat the salt every day. So that effectively eliminates "the sun doesn't shine at night" argument.
This whole article and discussion is about speculation. It's even headlined with a question, which emphasizes the fact that it's speculation. Will it work? Will it have any significant effect? Is it even worth it? That's the kinds of questions we should be asking and trying to answer. In the short term, I believe it would work. As an absolute emergency backup system it might work--for a short time. Is it worth it? No, I don't think so. For an individual residence I could see it working better than a generator--again only for the short term.
On the other hand, a whole bank of 'used' automotive battery packs could serve to power an emergency shelter even in the event of a catastrophic event--if the shelter itself survives. If a single battery pack offers 65KW of storage, ten of them would be 650KW, etc. A large enough bank of these batteries could offer days or even weeks of usage under tightly-controlled circumstances. Remember, unlike other types of battery, the Lithium-ion battery is designed for deep-deep cycling and with the proper controls can last for a thousand cycles or more. Such an emergency shelter would almost certainly include the needed control.
Self evidently smaller cars - The Tesla S is almost 5 metres long - comparable to a Jaguar XF.
A Mini, Honda Jazz (Fit), Ford Focus etc are all much smaller.
Smaller cars, weight drops off. Smaller battery pack needed, even less weight. Tesla Model C anyone ? Of if you could get it down to Fiat 500/Toyota IQ/Smart size, a notional Tesla Model A.