The recent announcement by Elon Musk of a ‘gigafactory’ battery manufacturing facility not only has meant a surge in Tesla stock (now up 634% year-over-year) but also brings the death spiral for electricity utilities that much closer. The death spiral is customer defection from the grid to run their households/businesses on solar panels plus battery storage. As more customers leave the grid utilities need to increase the cost of power to their declining customer base. The rising costs encourage more customers to defect from the grid – hence the death spiral. This is not a distant future scenario – current estimates of parity from solar plus battery storage are a mere ten years. Early adopters are already doing this putting pricing pressure on utilities.
With the announcement by Tesla for the gigafactory which will mean more efficiencies in battery production the cost of batteries will fall even more rapidly than at present. Who’s guessing Tesla will expand it’s business in to a power company. Morgan Stanley analyst Adam Jonas wrote: “Tesla’s quest to disrupt a trillion dollar car industry offers an adjacent opportunity to disrupt a trillion dollar electric utility industry. If it can be a leader in commercializing battery packs, investors may never look at Tesla the same way again.”
Each Tesla vehicle holds enough power to keep the average US home running for 3.5 days. With vehicle to home plug in power Tesla owners are already capable of running their homes from their solar panelled roofs. Bear in mind the Tesla supercharger stations capable of ‘filling up’ a vehicle to 50% in 20 minutes are free to Tesla owners forever. This network is currently being rolled out across the US and Europe (click to see the Supercharger network).
With the introduction over the next couple of years of the affordable Tesla Gen 3 coupled with the efficiencies realised from a gigafactory battery production plant, the potential for Tesla to dominate the EV and energy storage markets is enormous.