How Tesla plans to power the world

With the launch of Tesla Energy, Tesla CEO Elon Musk made it clear that — despite the popularity of his electric vehicle — his most significant contribution to the world may be the battery.

Tesla is banking on big business for its Powerwall and Powerpack batteries, with sales to eclipse those of its cars. But while the company is targeting the high end consumer, its innovations in energy storage could eventually help some of the 1.3 billion people living without access to electricity leapfrog the grid.

“This is gonna be a great solution for people in remote parts of the world where there’s no electricity wires or where the electricity is extremely intermittent, or extremely expensive,” Musk said onstage at the April 30 launch party for Tesla Energy in Hawthorne, California, home of SpaceX. “People in a remote village or an island somewhere can take solar panels, combine it with the Tesla Powerwall, and never have to worry about having electricity lines.”

Tesla Chief Technology Officer and co-founder J.B. Straubel has said he sees South Africa, where Musk grew up, as a huge market for battery storage. The Tesla suite of rechargeable lithium-ion batteries for homes, businesses, and utilities could do a lot for a country with a mismatch between supply and demand that leads to rolling blackouts.

Musk calls energy storage “the missing piece” of the energy equation, tweeting ahead of the Tesla Energy launch that the Powerwall is needed “for the future to be good.”

Musk has said this suite of batteries could disrupt the energy industry in the same way mobile technologies disrupted the telecommunications industry. But for that to happen he has to work on the price tag.

The Powerwall will cost $3,500, more than double the gross national income per capita in sub-Saharan Africa. But like Tesla Motors, which is developing a more affordable Model 3 electric vehicle to offer along with its higher end Model S and Model X, Tesla Energy is pursuing trickle down technology. “Tesla is driving the cost of batteries down,” Peter Asmus, principal research analyst at Navigant Research, told Devex. Expanding on what this could mean for the developing world, he said the key solutions for sustainable energy must come from “the marriage of solar and the battery” but “the weak link has been storage because it was too expensive.”

Asmus said Tesla Energy is completely disrupting the economics of batteries, citing estimates that battery costs may go down by more than 50 percent by 2020. One reason for that is Gigafactory 1, the massive lithium-ion battery factory Tesla is building east of Reno, Nevada. Musk says it will have a capacity greater than the sum of all lithium-ion batteries on the planet, building into a market that does not yet exist.

“We don’t want to be branded as just a battery company because that’s not what we are,” Arch Padmanabhan, who leads product strategy and application engineering for the energy storage group at Tesla, said at the VERGE conference on sustainability in San Jose, California, last week. “We’re a storage solution company.”

Padmanabhan hinted at the future growth of Tesla Energy when he said there is a reason why the company put “1” in the Gigafactory 1 name. “We are setting fairly high targets,” he said, prompting nods of agreement in a room of people who follow the out-of-this-world ambitions of the Tesla CEO. “We’ve done that in the past, and we’re succeeding in doing that.”

Asmus told Devex of his visit to Tesla Laboratories, where he said the Powerwalls looked like pieces of art he might hang on his wall, explaining that Tesla has found a way to make batteries “sexy.” Musk, whom some regard as a real life Tony Stark — the inventor turned superhero in “Iron Man” — inspired his audience at the launch of Tesla Energy so much so that several observers compared the Tesla Energy announcement to the Steve Jobs introduction of the iPhone. Just as the Model S is driving electric car innovation, the Powerwall and Powerpack could drive battery innovation.

“Massive improvements in storage capacity have been just as important as the transformations in solar cell efficiency and LEDs in providing decentralized renewable energy in the developing world,” Kristina Skierka, campaign director for Power for All, told Devex.

But while development professionals should certainly pay attention to what Tesla batteries could mean for the developing world, she emphasized that there are energy solutions that are immediately available and affordable. “Even without more tech innovation, we have the basic energy solutions today to achieve universal energy access. Innovations in financing and payment systems, distribution, business models and policy will be the critical enablers to achieve universal energy access before 2030.”

Padmanabhan added that the technology and financing of storage is happening faster than solar, so his team at Tesla headquarters in Palo Alto, California, has to keeps their fingers on the pulse of technology development, constantly testing and iterating everything from the energy density to lifetime of battery cells.

With a number projects to provide alternatives to grid power already underway, the next step must be greater innovation in the affordability and availability of products and services, Skierka said. “As basic access is achieved, the market develops, and household electricity demand rises ... there will be exciting opportunities to bring in an increasingly diverse set of products and services — like the Powerwall,” she said.

Navigant predicts the market for microgrids, systems of solar panels and batteries, will grow to $20 billion by 2020. With “energy poverty” rising on the global development agenda, entrepreneurs and donors are eager for viable, bankable solutions — and hopeful the real life Iron Man will deliver.

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