Tesla Stationary Storage Investors Thread

[SBenson]

Randy Carlson of Seeking Alpha is one of the rare people worth following on SA.

His comments regarding residential storage aggregation and deriving additional economic value are worth reading (and discussing).

Just to provoke interest, pasting a snippet here:

This study from the California PUC looks at use cases in detail.

http://www.cpuc.ca.gov/NR/rdonlyres...CA/0/Storage_CostEffectivenessReport_EPRI.pdf

Look particularly at figure ES-3 in the Executive Summary. I shows a variety of cases where the breakeven capital cost exceeds $3,000/kWh - which is to say $30,000 for a 10kWh battery system...!!

He has a number of related comments starting here:
Randy Carlson's Comments (Page 2) | Seeking Alpha

and here
Randy Carlson's Comments (Page 3) | Seeking Alpha

Especially under the title : What Will The New Tesla Product Be And How Much Will It Cost? Here's My Best Guess

- - - Updated - - -

Storage can be as lucrative as cars in terms of end product $/kWh.

$100K ASP for Model S with a rough weighted average of 75kWh.

$13K revenue for 10kWh for home storage (per leaked reports).

They are very comparable.

Most people including Deutsche seems to think storage is less lucrative than cars. But that may not be the case.

 

[JRP3]

Somewhat surprised that this hasn't been thrown out there yet, but my assumption regarding stationary storage is that it will be part of the Tesla ecosystem: Car batteries that have degraded from 85kWh down to 50kWh will probably be replaced as a car battery - but have plenty of useful life left as a storage destination. Tesla will be able to double-dip on these AND shut down critics regarding 'auto batteries clogging landfills'. (Not to mention it's not a capacity issue when you're using recycled batteries.)

I think that's been assumed but I don't think Tesla has ever actually outlined this as part of their plan beyond a vague possibility. They may not feel the labor involved in reconfiguring a vehicle pack into the format they seem to be currently using is worthwhile. Of course there also won't be enough significant volume of used packs to make it viable for another 15 years or so.

 

[Rarity]

JB Straubel mentioned in one of his recent videos (in the Q&A) that Tesla was not intending to use old cells in stationary storage. His rationale was that once the cells were degraded, several years would have passed and the energy density and cost for new cells would be greatly improved. E.g., that 50 kWh pack with used cells to which you refer would be competing against a 150 kWh pack with new, cheaper cells in the same volume (my example, not his).

 

[Brentt]

Thanks. That's pretty massive. The land requirements are over 56,000 Sq ft or 1.3 acres. In many developed areas it may be hard to acquire sites of this size. Something a quarter of this size would require about 0.35 acres which is the lot size for a typical suburban home. So just about any attempt to collocate massive storage with massive load is going to run into competing land use issues. Smaller installations, 2 MW and under, will be able to make use of small parcels of land that are too small for other higher value uses.

56,000 sq ft is a drop in the bucket for a large data center, some are close to a million square feet, and having 20-40 MW of instant backup would not only
be useful it would also help reduce the overall footprint by buying and storing green energy when it's available.

 

[Newb]

There's going to be a large battery conference in Germany next week. The agenda is interesting in itself because based on that you can easily draw a map of research institutes and firms involved in battery technologies and their respective focus:

Battery Day / Battery Power 2015

http://www.battery-power.eu/fileadm...amm/2015/Agenda_Batteryconference_2015_lr.pdf

I wish I had time to go there but maybe someone else from TMC will attend the conference?

In any case, if Tesla is looking for talented battery guys in Europe, they should be looking out there first. There's many students and early-stage researchers presenting posters, too.

 

[jhm]

JB Straubel mentioned in one of his recent videos (in the Q&A) that Tesla was not intending to use old cells in stationary storage. His rationale was that once the cells were degraded, several years would have passed and the energy density and cost for new cells would be greatly improved. E.g., that 50 kWh pack with used cells to which you refer would be competing against a 150 kWh pack with new, cheaper cells in the same volume (my example, not his).

That's right. Cells may become obsolete before they are fully degraded. At some point the value of recoverable materials becomes greater than the use value, and recycling is the optimal disposition.

- - - Updated - - -

56,000 sq ft is a drop in the bucket for a large data center, some are close to a million square feet, and having 20-40 MW of instant backup would not only
be useful it would also help reduce the overall footprint by buying and storing green energy when it's available.

If that is the power requirements of a data center, it certainly make sense to collocate. The basic point I am trying to make is that it makes more sense to locate storage close to the end user to minimize transmission and technical losses on stored power. So if a data center or any other industrial user need 20 MW, then by all means, they should have that scale of storage on or near site. I expect that the Gigafactory itself will be a candidate for such a system.

 

[jhm]

I noticed that JB said the 1MW storage at the Fremont plant can cover about 10% of its peak demand. They want to add another MW soon. I wonder what would be optimal, probably not more that the difference of peak to average demand, unless they want serious backup. If they are only running 2 8-hour shifts, perhaps their average is around 7MW. So 2-3 MW storage may be optimal for peak shaving.

 

[Lloyd]

Also this article from Motly Fool......

General Electric Isn't Letting Tesla Motors Win the Energy Storage War (GE, TSLA)

 

[jhm]

Also this article from Motly Fool......

General Electric Isn't Letting Tesla Motors Win the Energy Storage War (GE, TSLA)

Many will pilot. Few will fly.

 

[jhm]

Randy Carlson of Seeking Alpha is one of the rare people worth following on SA.

His comments regarding residential storage aggregation and deriving additional economic value are worth reading (and discussing).

Just to provoke interest, pasting a snippet here:



He has a number of related comments starting here:
Randy Carlson's Comments (Page 2) | Seeking Alpha

and here
Randy Carlson's Comments (Page 3) | Seeking Alpha

Especially under the title : What Will The New Tesla Product Be And How Much Will It Cost? Here's My Best Guess

- - - Updated - - -

Storage can be as lucrative as cars in terms of end product $/kWh.

$100K ASP for Model S with a rough weighted average of 75kWh.

$13K revenue for 10kWh for home storage (per leaked reports).

They are very comparable.

Most people including Deutsche seems to think storage is less lucrative than cars. But that may not be the case.

The CA PUC study is interesting, but limited. They basically have a financial model that they apply to various use cases and scenarios. The most promising use cases are ancillary services to handle frequency and distributed (substation) storage with 2 hour duration. The better return on distributed storage confirms my assertion that it is generally better to locate storage close to use. The use case can also be made better when incentives are in place to reward frequency service as well. Basically this combines the benefits of ancillary service with substation back up. So run 22b and 23 move in the right direction, and it is unfortunate that the researchers did not combine these. Anyway, there model is available for Tesla to use.

In any case, Tesla can test different configurations in this model and determine optimal configurations for each use case. Of course, Tesla probably has its own models for such testing.

The limitation to this methodology is that it is strictly pro forma. Real world conditions will need to be tested. So while the break even cost per kWh or kW calculation are promising, actual utilities will not likely be willing to pay thatuch. They will need a little more margin for error and upside potential. Thus, these are strictly upper bounds on demand under ideal conditions. Naturally, utilities will want to pay less for batteries. Moreover, competition among suppliers will give them opportunities to do so. To get any serious volume in this market, Tesla will have to offer batteries at a fraction of the breakeven hypothetical prices.

 

[ScepticMatt]

Also this article from Motly Fool......

My prediction is that molten salt batteries with their piss-poor energy density will go nowhere, Durathon or otherwise.
Seems like even GE isn't convinced, which is why they started using outsourced lithium batteries for their 8 MWh project.

 

[jhm]

As You Await Teslas A Battery Presentation From Tesla CTO JB Straubel | CleanTechnica

CleanTechnica found this very nice quote.

“Most other companies do not believe that battery volume will grow as fast as it’s going to,” JB responded when questioned about a Lux Research report claiming Tesla wouldn’t bring costs down that much and the Gigafactory will sit at 50% overproduction. “They don’t understand the tight linkage between cost and volume. We’re at this crossing-point where a small reduction in cost is going to result in a ridiculously big increase in volume, because the auto industry is so big.”

The key issue here is this "tight linkage between cost and volume". When you reach critical cost thresholds unexpected markets open up. You cannot look a past trends to extrapolate past these crossing-points. There is a discontinuity that can elude even "experts."

This is one reason why we should not be looking at current prices of stationary storage and expect that Tesla will take those markets at those price points. If $1500/kWh was the right price for stationary storage, that market would have already taken off. We need to find the price point that will open up a 30 GWh stationary market. I suspect that price is well less than $400.

 

[vgrinshpun]

As You Await Teslas A Battery Presentation From Tesla CTO JB Straubel | CleanTechnica

CleanTechnica found this very nice quote.



The key issue here is this "tight linkage between cost and volume". When you reach critical cost thresholds unexpected markets open up. You cannot look a past trends to extrapolate past these crossing-points. There is a discontinuity that can elude even "experts."

This is one reason why we should not be looking at current prices of stationary storage and expect that Tesla will take those markets at those price points. If $1500/kWh was the right price for stationary storage, that market would have already taken off. We need to find the price point that will open up a 30 GWh stationary market. I suspect that price is well less than $400.

I suspect that the price is much higher than $400/kWh. According to the yesterday's Deutsche Bank note "The breakeven point to replace a peaker plant with stationary storage is estimated at $842/kWh (EPRI Study)" So Tesla is in a truly unique position to have a luxury to pick the selling price that optimizes demand and their ability to meet it. It looks like they have a huge window to work with - somewhere between $300 and $800/kWh.

Given that for foreseeable future their ability to generate profit is coupled to their ability to produce/source the batteries, I think that their strategic planning should achieve parity between automotive and stationary profit per kWh.

The best case scenario automotive profit: ASP x Net Margin / Battery Capacity. According to Deepak Ahuja Tesla's goal is to eventually have net margin of around 15%. So potential automotive profit would be: 100,000*0.15/85 = $177/kWh.

Now if we assume cost of the battery pack production at the GF to be $150/kWh, and throw additional $50/kWh to cover R&D and SGA expenses, the total battery pack cost would be at about $200/kWh.

So Tesla needs to price their stationary storage battery packs at $377/kWh, which is well below the $840/kWh threshold. Even is we assume Tesla's all in battery pack cost of $300/kWh, they can still make the same profit as automotive if they sell stationary storage at $477kWh and above, still well below $842/kWh threshold.

So I think that Tesla is about to morph in much, much more valuable company. I believe that in order to account for the stationary storage the stock PT should be multiplied by 50/35=1.43. So if Tesla automotive business is properly valued at $250 per share, to account for stationary storage, one would need to value the company at 250*50/35 = $359.

 

[doggusfluffy]

I suspect that the price is much higher than $400/kWh. According to the yesterday's Deutsche Bank note "The breakeven point to replace a peaker plant with stationary storage is estimated at $842/kWh (EPRI Study)" So Tesla is in a truly unique position to have a luxury to pick the selling price that optimizes demand and their ability to meet it. It looks like they have a huge window to work with - somewhere between $300 and $800/kWh.

Given that for foreseeable future their ability to generate profit is coupled to their ability to produce/source the batteries, I think that their strategic planning should achieve parity between automotive and stationary profit per kWh.

The best case scenario automotive profit: ASP x Net Margin / Battery Capacity. According to Deepak Ahuja Tesla's goal is to eventually have net margin of around 15%. So potential automotive profit would be: 100,000*0.15/85 = $177/kWh.

Now if we assume cost of the battery pack production at the GF to be $150/kWh, and throw additional $50/kWh to cover R&D and SGA expenses, the total battery pack cost would be at about $200/kWh.

So Tesla needs to price their stationary storage battery packs at $377/kWh, which well below the $840/kWh threshold. Even is we assume Tesla's all in battery pack cost of $300/kWh, they can still make the same profit as automotive if they sell stationary storage at $477kWh and above, still well below $842/kWh threshold.

So I think that Tesla is about to morph in much, much more valuable company. I believe that in order to account for the stationary storage the stock PT should be multiplied by 50/35=1.43. So if Tesla automotive business is properly valued at $250 per share, to account for stationary storage, one would need to value the company at 250*50/35 = $359.

I think $359 would constitute extraordinary. :wink:

"The long-term demand for stationary energy storage is extraordinary," added JB Straubel, Tesla’s chief technical officer, during that call. "We’ve done a huge amount of effort there and have talked to major utilities and energy service companies." That plan seems like it's now much closer to a reality the company can share with the public.

I'll chip in with my WAG, I hope it compliments this wealth of ideas and hasn't already been churned to death. I think the Tesla Home Battery will visually resemble a Supercharger. Maybe not hollow but not visually like the white rectangle box they tested with SolcarCity. Since we're assuming a lower density cell a larger but thinner footprint might be ideal. Perhaps even a Tesla Home Deluxe with solid snake module in the future? Anyway...I think it will indeed be unique and look cool in your garage, maybe have a low night light effect, perhaps glossy white and trimmed in red.

On an earnings call last year Musk had laid out his ambition to make something that would live in consumers' homes, instead of their cars. "We are trying to figure out what would be a cool stationary (battery) pack," Musk said. "Some will be like the Model S pack: something flat, 5 inches off the wall, wall-mounted, with a beautiful cover, an integrated bi-directional inverter, and plug and play."

Elon Musk says Tesla will unveil a new kind of battery to power your home | The Verge

 

[yesla]

I think $359 would constitute extraordinary. :wink:


I'll chip in with my WAG, I hope it compliments this wealth of ideas and hasn't already been churned to death. I think the Tesla Home Battery will visually resemble a Supercharger. Maybe not hollow but not visually like the white rectangle box they tested with SolcarCity. Since we're assuming a lower density cell a larger but thinner footprint might be ideal. Perhaps even a Tesla Home Deluxe with solid snake module in the future? Anyway...I think it will indeed be unique and look cool in your garage, maybe have a low night light effect, perhaps glossy white and trimmed in red.
View attachment 79082



Elon Musk says Tesla will unveil a new kind of battery to power your home | The Verge

Like if the unit is the exact shape and size of the hole in the SC?? ;p that'd be cute.

 

[Runarbt]

Like if the unit is the exact shape and size of the hole in the SC?? ;p that'd be cute.

Of course, finally a use for all those cut out from supercharger production.:-D

 

[jhm]

Vgrinshpun, I think you missed my point. I'm not talking about how much profit Tesla may need to price into this. That is the supply side. What I am talking about is the demand side. How big is the market at $800 per kWh? Maybe 1 GWh. How about $400? 10 GWh. $200? 100 GWh. $100? 1000 GWh. I'm just making this up to illustrate a demand curve. So if Tesla wants to address a $4B market $400 is low enough, but if they want to reach a $20B market they've got to press the price down to $200. In the short run, they can go after a small market priced at say $500, but longer term with the gigafactory Tesla will want to sell 15 GWh per year. So the demand question is, how low will they need to take the price? The supply question is whether they can be sufficiently profitable at that price. Tesla has the opportunity to follow an experience curve strategy. As they double their cumulative production they will be able to drive down the cost and price by 10 to 15 percent. As they drive down the price the size of the addressable market grows which sustains the ability to double cumulative production.

This is very much the sort of path that SolarCity is on. They know that as they drive down both their cost per W and the price they offer to customers, they are able to enter new markets. So they are relentless in driving down their installed cost per W, and this is what enables them to keep doubling their customer base every year. It's not just a matter of beating the competition or hitting some predetermined profit metric, it's about constantly expanding the addressable market.

 

[doggusfluffy]

Like if the unit is the exact shape and size of the hole in the SC?? ;p that'd be cute.

HAHA, or molded to match the FOB. :smile:

 

[Brentt]

There could also be a large demand for stationary and mobile energy in military applications.
I can see a big benefit of being able to fly or truck into the battle zone a 30MW system that is
powered up, and ready to go that produces zero sound and emissions.

 

[doggusfluffy]

Vgrinshpun, I think you missed my point. I'm not talking about how much profit Tesla may need to price into this. That is the supply side. What I am talking about is the demand side. How big is the market at $800 per kWh? Maybe 1 GWh. How about $400? 10 GWh. $200? 100 GWh. $100? 1000 GWh. I'm just making this up to illustrate a demand curve. So if Tesla wants to address a $4B market $400 is low enough, but if they want to reach a $20B market they've got to press the price down to $200. In the short run, they can go after a small market priced at say $500, but longer term with the gigafactory Tesla will want to sell 15 GWh per year. So the demand question is, how low will they need to take the price? The supply question is whether they can be sufficiently profitable at that price. Tesla has the opportunity to follow an experience curve strategy. As they double their cumulative production they will be able to drive down the cost and price by 10 to 15 percent. As they drive down the price the size of the addressable market grows which sustains the ability to double cumulative production.

This is very much the sort of path that SolarCity is on. They know that as they drive down both their cost per W and the price they offer to customers, they are able to enter new markets. So they are relentless in driving down their installed cost per W, and this is what enables them to keep doubling their customer base every year. It's not just a matter of beating the competition or hitting some predetermined profit metric, it's about constantly expanding the addressable market.

jhm, wouldn't the stationary business model resemble the Tesla car strategy? High value, low volume to start and transition into high volume over time? I still wonder if this business won't more resemble Boeing with massive pre-orders booked in advance all at one time.

One of the truly great pieces of cinema...

Brilliant! It's genius. It's just exactly what Hudsucker needs at this juncture. Sure, sure, even a blind man could tell you that there's an enormous demand for this, uh...

hudsucker proxy clip - YouTube