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Tesla's new core business? CES Grid Storage Device For SuperCharger/SuperSwapper

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C.O.

I think that Randy's article was a good jumping off place.

Superchargers are free to Tesla and to drivers for several important reasons:
1. Solar power fed into the grid for $0.30/kWh
2. Battery grid buffer. Tesla is selling their ability to back the grid during peak use so that the grid doesn't have to buy "peaker" power $0.15/kWh available
3. Time of Use. Tesla can "sell" power all day via solar and battery, and can charge back in the evening and "buy" for $0.05/kWh

Will all of the above generating revenue for Solar City, the Superchargers are going to be break-even OR make money for Tesla.

The value of the battery grid buffer will likely increase since peaker power is so expensive.

Yes, I've figured for awhile that swap stations would do rate arbitrage and help reduce demand charges, but I wasn't thinking through the scale of the potential income from that until after I read Randy's piece. For that matter, Randy didn't write it up right. Elon is going for the jugular with this grid power gambit.

If you scale the grid storage capacity required to support 100 million automobiles (whether for swapping, or charging) you get hundreds of gigawatts of power storage. You are in the range of what is required to load balance a muti-terawatt national energy grid that is solely renewable sources, like solar/wind/hydro.

So Tesla is trying to simultaneously take over the auto industry, and a substantial portion of the energy industry (with grid storage), while enabling the near total destruction of fossil fuel interests (barring non-energy uses anyways) by players like Solar City (whose distributed utility model is also designed to put traditional utilities out of business). And technically speaking, the quantity of grid storage available on the cars themselves would allow only Tesla and Solar City to power the country (so screw those other renewable guys). The scope of the vision is just breathtaking. And Tesla is just going to do this as a byproduct of its "core" business.

Anyways, back to Randy's piece, when I read it, it seemed he was using a model based on the regulations where home solar users are able to sell power back to the grid at the prevailing rate.

But I know for a fact that peaker power is dramatically more expensive than the prevailing rate, and grid storage at sufficient scale can do the job of peaker plants, better. This is a high quality, on demand energy source that can be accessed at digital speeds. Seems like you should be able to get peakerish rates, which (if I recall correctly) are tens or hundreds of times the market price.

So I think the whole rate-arbitrage model needs some serious work. These grid storage devices shouldn't be operating under the same pricing conditions that were imposed on home solar users (who were kind of powerless in the regulatory wrangling that set up the system they operate under). Peaker rates are much more likely, and when it scales enough the rates should be more comparable to the large backup gas generators that take longer than peakers to get online (so less money than peakers, but more than prevailing market).

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Grid storage is actually an excellent use for battery packs at the end of their automotive life. A 25% reduction in capacity will probably be enough to get a Model S owner to buy a new pack. Tesla gets to use the 75% remaining capacity of the old pack for grid storage. This residual value of old packs might also explain why Tesla has offered replacement battery packs for $12,000.

Tesla offered battery replacement packs for $12,000 because they will make a big profit on that regardless of their future plans.
 
here's the link to solar city / tesla "backup" device.

Home Energy Storage & Battery Backup System - SolarCity


"An additional benefit of energy storage is to reduce peak-usage charges on your utility bill. Some utilities offer Time-of-Use (TOU) rate plans in which the price of electricity varies based on the hour of the day. Rates are higher during the afternoon when electric demand is at its "peak" across all utility customers.
A storage system may help you save more money by drawing power from your battery instead of from the grid during higher rates peak hours. You can then recharge your battery during lower rate, off-peak hours. "

At the scale of the superchargers I'm sure they are working out deals directly from the utilities. If Elon is turning this into a distributed electrical plant w/ storage then he's going to need the utilities to stay in business and maintain their power lines. From what I understand this is very similar to SC plan, just with bigger equipment. So if you flip this back to SC, they may able to do installs on all those flat roofed industrial parks with the tesla batteries as well. Very interesting.

@CO - you are on fire! awesome posts on the batteries as well.
 
C.O.

I think that Randy's article was a good jumping off place.

The value of the battery grid buffer will likely increase since peaker power is so expensive.
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This. I just can't imagine why simple rate arbitrage should be how we should model this. The patent I referenced (which I recommend everyone read) mentions this type of summer arbitrage. But the real money (at the small initial scales) is the peaker rates.

In a few years, when Tesla is operating GW levels of storage they will grow out of the peaker business because those plants will all be out of business. Then the per unit income goes down because you are competing with larger semi-permanent sources. As you scale more you eventually are doing a tango with renewable sources to offer below market rates that put conventional power sources out of business.

So I think a proper model needs to look at this as a trajectory. And when you look at the trajectory, all of the incentives are aligned to help Tesla bootstrap this capability up the energy chain. This is completely aside from the market forces and incentives that are a result of their "core" auto business.

These things might be able to be making gobs of money right away, just from their grid storage business. The key to this being that Tesla has best in world large, rechargeable battery economics (thats a fact btw). By far. This is first mover advantage to the nth degree.

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Tesla just updated teslamotors.com to now have the SuperCharger first and formestly featured. (I think this happened within the last 2 hours). Model S is now in the background.

I think you're right on the new core business.

Wow. My GM-like investment just became an XOM-like investment.

More like a Borg-like investment. Resistance is futile.

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I wonder if they'll be doing a combined optimization of regulation, reserves, and energy arbitrage with those batteries. You can make quite a bit more money if you do that than simple energy arbitrage.

Also This.
 
The immediate thought I had when I first read this idea about grid level storage as a business - clearly the car battery packs, at 85kw each, are getting ganged together in astounding numbers to eventually have enough extra packs to actually do this. I don't know where the cost would need to be to make this work, but it seems to me that the cost for the packs would need to be a lot lower than we've been thinking its actually at right now, to make that feasible.

Run a quick model of how much pack capacity you need to support EITHER SuperCharging or SuperSwapping with millions of cars on the road (its a bit more with swapping) and you get astounding numbers. I hadn't really modeled the requirements of SuperCharging until recently, but it seems obvious that you need massive energy sources on site when you have millions of cars on the road on a holiday weekend. Tesla obviously isn't going to co-locate power plants at these sites, so batteries make sense. When you think about it, the power requirements needed for swapping and charging is identical, and the only difference is the rate at which you deliver the power to the cars.

At the level of a single pack, if this electricity arbitrage is worth $0.10 per kwh (say buy at $0.05, sell at $0.15), and if you move 50 kWh/day, then the pack is earning $5/day. That's around $1800/year. If the pack costs $400/kWh to manufacture (I've seen that number somewhere before), then you're into the $32k range. You need closer to 20 years to break even and that doesn't seem all that good. But if the packs cost more like $100/kWh to manufacture, then you're down to about 5 years to pay for the pack - that sounds really desirable.

On its own, I agree, but I think we need to look at a trajectory model. The packs today cost more than $100kWh, but sub $100kWh packs will be available by Gen III at the latest. Even with the basic model, the current pack prices make the economics look favorable, even in the near term, and even ignoring the need to support SuperCharging/SuperSwapping, and possible swap fee income from SuperSwapping. This is a no-brainer from a business standpoint, even ignoring more lucrative trajectory models.


I really don't know what to make of this, but if Tesla has figured out how to do production levels of grid level storage and make it pay, they can build the grid storage company themselves, or they can sell the packs to others to implement grid storage; either way, they're going to need a bigger battery pack manufacturing plant.

There have been discussions about how the battery operation is a "bottleneck" (with crews working 2 shifts) and that they will need to invest some money to expand it's capacity. The assumption was that it was a bottleneck at scales needed to support Model S production, but it now seems more likely that its a bottleneck at the scales Tesla needs for these CES activities (might as well move past "grid storage" folks. CES is easier to type, and more accurate, lol).

That said, the CES battery requirements to support SuperCharging/SuperSwapping are only ~5-10% (very rough guess) of the basic vehicle business. This is true scaled into the future. If every car was a Model S right now, you would have like 8-9TWh of storage on the cars themselves, while only needing 500-700GWh of CES capacity to support road trips. The current grid generates like ~4TW of power, so that gives you some scale. (all numbers for the U.S. btw)

Eventually, a REALLY smart grid will use the auto-fleet itself as a major power source and storage medium.

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You make an interesting case, CO. How do we know that it would be Tesla profitting from this and not Solar City? I'm long TSLA, but no SCTY, maybe this will be my impetus to "diversify".

Solar City will be on the other side of the renewable "tango". CES is a significant fraction of the future energy market, but power generation is always a much larger fraction. Fundamentally, Solar City can't grow really large without really large CES resources, and really large CES resources are only needed in order to do load leveling for a massive renewable infrastructure.

So Tesla's CES business can only grow REALLY large (beyond its pure automotive uses, which means the capacity will exist regardless) if solar and wind prices continue to fall until they beat out conventional sources.
 
Let me throw out another mind blowing scenario. We know by factory tour stories that Tesla has been building far more battery packs than cars. It has been assumed that they were going to be sold to Toyota or Daimler for EVs or maybe the battery swapping idea proposed.

What if Tesla has been storing up a surplus of these things while the grid idea has been under R&D?

We know that Solar City got a big loan from Goldman Sachs. Wouldn't it be like Elon to have a big sale of packs right before 2nd quarter end? Maybe just enough to show a profit for the second quarter in a row? Sell more in the 3rd quarter and maybe he hits 4 straight quaters of profitablity? Isn't that one of his CEO requirements for stock options?
 
Let me throw out another mind blowing scenario. We know by factory tour stories that Tesla has been building far more battery packs than cars. It has been assumed that they were going to be sold to Toyota or Daimler for EVs or maybe the battery swapping idea proposed.

What if Tesla has been storing up a surplus of these things while the grid idea has been under R&D?

We know that Solar City got a big loan from Goldman Sachs. Wouldn't it be like Elon to have a big sale of packs right before 2nd quarter end? Maybe just enough to show a profit for the second quarter in a row? Sell more in the 3rd quarter and maybe he hits 4 straight quaters of profitablity? Isn't that one of his CEO requirements for stock options?

Remember that Tesla has been providing battery packs for SolarCity home energy storage systems: http://www.solarcity.com/residential/energy-storage.aspx
Capacity for these should be around 50kWh (2kW continuous load for 24h)

No idea on the production volume, though.
 
Remember that Tesla has been providing battery packs for SolarCity home energy storage systems: http://www.solarcity.com/residential/energy-storage.aspx
Capacity for these should be around 50kWh (2kW continuous load for 24h)

No idea on the production volume, though.

Yes, you are correct. They have been selling a consumer version, I wonder if they will come out with a commercial version like the one envisioned for the supercharger network. Basically using the car batteries in an array
 
Solar City will be on the other side of the renewable "tango". CES is a significant fraction of the future energy market, but power generation is always a much larger fraction. Fundamentally, Solar City can't grow really large without really large CES resources, and really large CES resources are only needed in order to do load leveling for a massive renewable infrastructure.

So Tesla's CES business can only grow REALLY large (beyond its pure automotive uses, which means the capacity will exist regardless) if solar and wind prices continue to fall until they beat out conventional sources.

That would be true if the companies were hmmm-- stand alone. But I'm not so sure Elon will choose that division of capital and focus. Grid storage and power control (and associated revenue balance) is the domain of SCTY even if 1/2 enabled by Tesla battery production. The revenue transfer equation to form business and engineering focus would drive a license deal to favor SCTY - in fact, I would not be surprised to learn SCTY owns the core business revenue of Tesla Super-charging stations even now. This would portend a strong inclination for the holding company Elon has floated. It might be wise to carry long positions in both companies for a while imo.
 
I definitely don't believe swapping is in the cards, but I'd love to be surprised.

However, this sort of overall thought on CES is just great. The seekingalpha.com article was great and it's a shame real media outlets, like the Wall St Journal or Times haven't put out an article detailing this concept....yet.

It's almost obvious and lends a lot of credibility to the Super Charger station land grab Tesla just pulled off in front of us.

Tesla is undervalued until it hits 20 billion cap at this point, considering these things. It's so much more than just the cars.

Not only massively disrupting how cars are made and sold but also the grid power system, oil cartels and getting a premium from other automakers. The Apple comparison gets thrown around a lot but it's like how they dominated the music, communication and home laptop (iPads killing home PC's) markets.
 
After reading this thread I think "the way for the Tesla Model S to be recharged throughout the country faster than you could fill a gas tank" is through grid tied batteries at the supercharger stations.

What if Tesla has found that their packs are capable of safely charging and discharging at 6C (10 mins). This normally would require a massive substation feed from the utility. Not going to happen at the hole-in-the-wall locations of the Supercharger stations. But if they've got battery packs at the stations this won't be a problem as the battery will be the high current buffer. "Trickle" charge the station batteries from the grid at night and solar during the day. Then dump a massive charge into a car when it pulls up. If too many cars happen to stop by and deplete the batteries, no worries - just fall back to 120kW fed from the grid.
 
After reading this thread I think "the way for the Tesla Model S to be recharged throughout the country faster than you could fill a gas tank" is through grid tied batteries at the supercharger stations.

What if Tesla has found that their packs are capable of safely charging and discharging at 6C (10 mins). This normally would require a massive substation feed from the utility. Not going to happen at the hole-in-the-wall locations of the Supercharger stations. But if they've got battery packs at the stations this won't be a problem as the battery will be the high current buffer. "Trickle" charge the station batteries from the grid at night and solar during the day. Then dump a massive charge into a car when it pulls up. If too many cars happen to stop by and deplete the batteries, no worries - just fall back to 120kW fed from the grid.

Assuming the battery chemistry is solved, you'd still have a problem that in order to charge at that rate you would have to supply 500 A or 2500 V power to the car. You can't lift a 1500 A cable by hand, and a 2500 V source will arc over everything.

So you'd need to install some sort of robotic way to get that power supply plugged into the car, say coming up from the bottom and then connecting under the nose of the car or something.
 
Yes, I've figured for awhile that swap stations would do rate arbitrage and help reduce demand charges, but I wasn't thinking through the scale of the potential income from that until after I read Randy's piece. For that matter, Randy didn't write it up right. Elon is going for the jugular with this grid power gambit.

If you scale the grid storage capacity required to support 100 million automobiles (whether for swapping, or charging) you get hundreds of gigawatts of power storage. You are in the range of what is required to load balance a muti-terawatt national energy grid that is solely renewable sources, like solar/wind/hydro.

So Tesla is trying to simultaneously take over the auto industry, and a substantial portion of the energy industry (with grid storage), while enabling the near total destruction of fossil fuel interests (barring non-energy uses anyways) by players like Solar City (whose distributed utility model is also designed to put traditional utilities out of business). And technically speaking, the quantity of grid storage available on the cars themselves would allow only Tesla and Solar City to power the country (so screw those other renewable guys). The scope of the vision is just breathtaking. And Tesla is just going to do this as a byproduct of its "core" business.

Anyways, back to Randy's piece, when I read it, it seemed he was using a model based on the regulations where home solar users are able to sell power back to the grid at the prevailing rate.

But I know for a fact that peaker power is dramatically more expensive than the prevailing rate, and grid storage at sufficient scale can do the job of peaker plants, better. This is a high quality, on demand energy source that can be accessed at digital speeds. Seems like you should be able to get peakerish rates, which (if I recall correctly) are tens or hundreds of times the market price.

So I think the whole rate-arbitrage model needs some serious work. These grid storage devices shouldn't be operating under the same pricing conditions that were imposed on home solar users (who were kind of powerless in the regulatory wrangling that set up the system they operate under). Peaker rates are much more likely, and when it scales enough the rates should be more comparable to the large backup gas generators that take longer than peakers to get online (so less money than peakers, but more than prevailing market).

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Tesla offered battery replacement packs for $12,000 because they will make a big profit on that regardless of their future plans.

CO,

I dont' know how much THIS has been discussed, but what about an install by Solar City that would a Tesla buyer to plug their car into the grid and use ITS battery pack as grid storage/buffer/TOU for all the time that the car is home.

That might only amount to 50% of the hours during a week/month, but still the arbitrage/peaker funding could offset the cost of charging and ultimately, the Model S.

The other service I think we will see (or hope) will using the car for home power backup (a la Solar City) but connecting to the car directly.

If Tesla sells 25,000 cars x 70kwh = 1.75 GW of available battery backup
 
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You can't lift a 1500 A cable by hand, and a 2500 V source will arc over everything.

I know I'm dating myself but this reminds me of the Star Trek original TV series episode of the M5 computer, which was so hungry for power it decided to just go straight to the source and arc a gigantic beam of voltage right across the room (vaporizing one of the red-shirted security personnel in the process).
 
You make an interesting case, CO. How do we know that it would be Tesla profitting from this and not Solar City? I'm long TSLA, but no SCTY, maybe this will be my impetus to "diversify".

The Numbers Behind Tesla and SolarCitys Home Energy Storage Play : Greentech Media

This article from about a year ago says that both Tesla and Solar City are submitting applications to Pacific Gas & Electric under California’s Self-Generation Incentive Program. SGIP provides $ credits for site generated and stored energy with capacity to discharge. Not clear if it's joint apps or what.

Lessons Learned From SolarCitys First Home Energy Storage Installs, Updated : Greentech Media

This article from a few days ago mainly talks about Solar City's applications to the SGIP program.


I've been wondering how grid storage tech was going to get widely adopted given it's cost. Seems like Tesla/Solar City have found a way to finance it -- through the supercharger network! Pretty cool stuff!