Tesla's Musk talks 'gigawatt-hour scale' storage project

Dive Brief:

In a conference call with analysts last week, Tesla CEO Elon Musk said the company could announce “a gigawatt-hour scale” energy storage project “within a matter of months.”
Musk said the ability of Tesla's South Australia storage project to respond to millisecond changes in grid voltage levels is drawing the attention of utilities and creating demand for even larger projects.
During the conference call, Tesla also said it is looking to shift its long-term strategic focus to catching up with demand for its Powerwall residential storage product.

Dive Insight:

Elon Musk likes to think big. Last summer, he told South Australia Premier Jay Weatherill that Tesla could build a 100 MW storage system in 100 days. By November, Tesla had a 100 MW, 129 MWh energy storage system up and running at a wind farm operated by Neoen of France.

At the time, the South Australia project was considered the largest energy storage project in the world. Since then, even larger projects have cropped up, but Musk seems ready to step up to the challenge again.

“The industry has been flirting with the gigawatt-hour scale projects for a while now,” Ravi Manghani, director of energy storage at GTM Research, told Utility Dive via email. He mentioned Rongke Power’s 800 MWh project in Dalian, China, and Xcel Energy’s bid for a 150 MW, 10 hour project in Colorado. Also in Australia, Lyon Group has floated gigawatt scale solar-plus-storage projects with battery storage in the 1 GWh range.

“Given this trend, it’s only a matter of time someone announced a 1 GWh scale contract,” Manghani said. The technology exists, he said, but “it’s about finding the right cost point and project economics.”

It appears Australia may be the spot for such large storage projects. Electrek in January reported that Tesla’s South Australia storage project made AU$1 million in a few days. The prospect of those kinds of revenues, combined with an electric system that is facing challenges as it transitions to higher levels of renewable generation, creates opportunities for energy storage.

In its latest quarterly earnings filing, Tesla said it expects its energy storage products to experience “significant growth.” And the company is still holding to its goal of tripling energy storage sales in 2018.

Tesla says it is ramping up production of its battery Gigafactory in Nevada over the next several quarters, but demand is still “greater than our current production capacity for energy storage.”

The company said that although it deployed a record number of residential Powerwall systems in the first quarter of 2018, its net backlog continued to grow during the quarter. Catching up with that backlog is a long-term corporate priority, Jeffrey Straubel, Tesla’s chief technology officer, said during the earnings call.

In part, that backlog appears to be the result of what Tesla called “bottlenecks” at the upcoming Gigafactory. Tesla said it is possible the cost of building and operating it could exceed current expectations and take longer than anticipated.

Overall, Tesla’s revenues from energy generation and storage increased by $196 million, or 92%, between the first quarters of 2017 and 2018. The company attributed the increase to a rise in Powerpack and Powerwall deliveries, $72.5 million in revenue related to the South Australia battery project and the deployment of additional storage systems.

However, the costs associated with Tesla’s energy generation and storage increased by $223.6 million, or 147%, from first quarter 2017 to first quarter 2018 primarily due to higher MWh deployed in the quarter, including costs related to the South Australia project and other system deployments.