Demand for Tesla's Megapack is far outpacing its production capacity.
As usual, press coverage of Tesla’s recent earnings report has focused on sales of the company’s vehicles (and, unfortunately, on Elon Musk’s immoderate statements about lockdowns and Tesla’s stock price). However, every quarter, those who take the time to read the whole report will find numerous nuggets of information that provide clues to future areas of growth.
The news on the solar and stationary storage fronts appears to be mixed. Tesla celebrated the installation of its 100,000th Powerwall home battery pack. However, as pv magazine noted, solar installations were down 35% from Q4 2019, and down 26% compared to Q1 2019. Energy storage installations were down more than 50% from Q4 2019’s record of 530 MWh, but up about 14% compared to the previous year.
Is Tesla’s solar and storage strategy stalling? Actually, as Kavya Balaraman discusses in a recent article in Utility Dive, there are reasons to believe that, once the current health crisis has passed, the company’s battery business could be poised for unprecedented growth.
Some of the weakness of the Q1 figures is surely due to the ongoing COVID-19 pandemic, which has forced Tesla’s New York factory that produces Solar Roof products to pause production, and at the same time put most installations on hold. The crisis has “essentially shut us down, both from the ability to install and the ability to get permits,” Elon Musk said on the earnings conference call.
Also, the fourth quarter is typically the strongest for solar and storage products, as buyers rush to take advantage of incentives. On the other hand, the fact that storage installations posted a strong gain year-to-year in spite of all the pandemic pandemonium bodes well for the future.
In fact, when it comes to the Megapack, a utility-scale grid energy storage battery with a capacity of up to 3 MWh, Tesla said in its 10-Q filing with the SEC that “demand is currently far outpacing our production capacity.”
“We have seen an inflection point in interest for utility level storage, primarily driven by progress in reducing costs,” the company said.
Industry observers agree that Tesla has been able to reduce the costs of its storage products very rapidly. Omeed Badkoobeh, CEO of storage company Yotta Energy, told Utility Dive that, in addition to the general downward trend of lithium-ion battery prices, Tesla has the added advantage of volume. “They are able to drive down costs simply on value. When they decide to purchase batteries, they are purchasing them for all their vehicles as well as the energy storage products,” he said.
If a prolonged shutdown at the Fremont facility makes a dent in Tesla’s vehicle deliveries, could energy storage products take up some of the slack? It’s possible that the Nevada Gigafactory, which produces batteries, could open up earlier than Fremont, which produces cars. “It’ll be interesting to see how some of the current conditions, not being able to produce vehicles, might actually shift production towards the energy storage products,” said Badkoobeh.
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