Tesla Could Be Changing The Dynamics Of Global Energy

Tesla’s announcement last week about creating a new line of batteries for use by businesses, consumers, and the electrical grid at large is a game-changer for the industry. Currently, when individuals or companies need back-up power, they usually rely on generators. Effective battery storage for large amounts of energy would be a game changer in that it would enable a separation of generation and use of energy produced through clean fuels like solar and wind power.

The big problem with solar and wind right now is that the energy is only useful when it is actually produced and, because a company cannot modify generation to correspond with demand needs, any excess power has to be sold back to the market for immediate use. Tesla’s new batteries could go a long way towards solving this problem. It is likely that Solar City, for example, would be very interested in any home application for large scale battery technology.

The unique differentiator here is not necessarily Tesla’s technology. The company certainly has state of the art tech, but what might make battery production feasible is the economies of scale that Tesla is looking to capture in battery production. Tesla’s new gigafactory will be an enormous production facility when it is completed and the facility should be able to produce 50 GWh of annual battery production eventually. This level of production should enable mass production of batteries at a fraction of the current cost.

But beyond Tesla, these economies of scale could also have benefits for other firms in the same industry. To the extent that Tesla’s production capabilities create new demand for component parts, the result would be lower costs for inputs in batteries. As supply costs fall, battery production costs across the industry would fall also leading to increased quantity demanded by consumers and businesses.

Put differently, when Edison invented the light bulb, the standard method for producing vase shaped glass vessels was very different than what it is today. Producing a vase by traditional glass blowing is expensive and time consuming. So if a person had to make just one or two light bulbs, it would likely take hours of work. Once millions of light bulbs are needed, the process becomes industrialized and the cost per bulb falls to pennies. The same principle applies to the economics of battery production, and that already has even competing producers salivating.

Batteries already may be much more profitable than most people realize, and so if Tesla can open up new markets for its products, it could drive the company’s earnings dramatically higher. The exact level of profit will depend on many different factors of course, but assuming that Tesla can sell its batteries based on charge capacity, then the profits could be astronomical. Tesla recently increased the price on some of its vehicles by $4,000 in concert with a 10KWh increase in battery capacity.

This implies that the company thinks 1KWh of battery capacity is worth roughly $400. 1 GWh is equal to 1 million KWh and Tesla’s new factory should be able to produce 50 GWh annually when at full production. This would, in turn, imply $20B in annual revenue from output produced by the factory. Of course this value will vary dramatically based on many factors including battery size and usage, but the raw figures are mind-boggling nonetheless and suggest the magnitude of the market potential here. Even if Tesla ultimately ends up selling battery capacity for one-tenth this amount, then the result would still be a huge boost to the company’s bottom line.

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  • I once as a child believed in a fable of a white jolly fat man and read books about flying cars in our future. Where does all of this pie in the sky thinking come from? Think of all of the acid spills when accidents happen as they always do. They will require Hazardous material training for police and every respondent to the scene. Way too costly, and why grow government anymore than it already is today?

    CO2 makes up .036% of the atmosphere. Tiny, miniscule, practically unnoticeable. Got to be a Religion if you believe it makes the other 99.964% warmer.

    Carbon and Life

    It is hard to overstate the importance of carbon; its unique capacity for forming multiple bonds and chains at low energies makes life as we know it possible, and justifies an entire major branch of chemistry – organic chemistry – dedicated to its compounds. In fact, most of the compounds known to science are carbon compounds, often called organic compounds because it was in the context of biochemistry that they were first studied in depth.

    What makes carbon so special is that every carbon atom is eager to bond with as many as four other atoms. This makes it possible for long chains and rings to be formed out of them, together with other atoms – almost always hydrogen, often oxygen, sometimes nitrogen, sulfur or halides. The study of these is the basis of organic chemistry; the compounds carbon forms with metals are generally considered inorganic. Chains and rings are fundamental to the way carbon-based life forms – that is, all known life-forms – build themselves.

    • Axel

      My apologies for my intrusion within this reply, if and/or where applicable. I am writing as I just found your comment and I thought I would try to clarify my intended, ‘up vote’ and as the comment provides a hopeful look to the future.

      I would (hope to) expect many people with abundantly more expertise than I would also comment.
      As a hearsay comment, my neighbor years or a decade ago mentioned that he was able to drive and/or lease, (although he was prohibited from buying//purchasing) an Electric Passenger Automobile//Car Vehicle. He absolutely enjoyed and highly recommended the Electric Vehicle.

      Also and at that time, and from my recollection, the highly admired late Mr. Huell Howser within his highly admired, PBS, ‘California Gold’ Television broadcasts was in a California desert and unexpectedly when there where many thousands or so Electric Cars, destined for destruction and even though there where seemingly an abundance of buyers and many buyers and/or Corporations that had already leased these Electric Vehicles and where ecstatic and hopeful to purchase these Electric Vehicles.

  • German Renewable Energy Keeps Blacking Out! Supply Often Less Than 2% Of Wintertime Demand 6. Dezember 2014

    My last post featured a commentary by renewable energy expert Prof. Fritz Vahrenholt, who forcefully conveyed the folly of Germany’s mad rush into renewable energy, and the country’s hysterical obsession with its suicidal fast-track shutdown of its stable base-electric-power generation.



  • kimyo

    Tesla Investigating Cause of Fire in Toronto With Model S

    “The Model S continues to have the best safety track record of any vehicle in the world,” Tesla said in a statement. “In this particular case, we don’t yet know the precise cause, but have definitively determined that it did not originate in the battery, the charging system, the adapter or the electrical receptacle, as these components were untouched by the fire.”

    The company last year updated charging software after a fire broke out in November while a Model S was recharging in a garage in Irvine, California. The company concluded the fire was caused by house wiring. Orange County fire officials said it could have been the house or the car’s charging cable.

    re-configuring a power grid designed and deployed decades ago is like trying to modify a jet airliner while it is in flight. small-scale, decentralized power is the way of the future, like it or not. the waste inherent in our current paradigm was easy to ignore when the eroei was 50 to 1. inputs of 5 to 1 or less will cripple the system.

  • jo6pac

    It’s a wait and see for me. Solar city panel system is not an off grind system so when the power is off so is your house and this might work the same way. They do make off grid systems. Then there this little item that a Russian scientist has been working on and if true 20yrs from now energy systems change.


    Click on egoout to go to up to date page.

  • I have some solar panels and 2 wind turbines on my house and new battery technology is a must and would be the most significant upgrade over alternative energy systems!

  • jadan

    Edison was developing a storage battery to complement Henry Ford’s design for an electric model T. At the time, about 1912, electric made much sense to these Titans. Edwin Black tells the story is his excellent book, Internal Combustion. Then Edison’s compound in New Jersey burnt down, in spite of the fact that all the buildings were separate cinder block structures build to prevent any general conflagration. Edison’s battery was lost. He had done some promising research and the new batteries could have ended the growth of the petroleum stinking noisy internal combustion monsters we still drive today. It was Standard Oil and General Motors who killed the EV. So, Elon Musk, a word to the wise: secure your facility…..