Tesla Battery May Not Destroy Utilities, But Utilities May Destroy Tesla

Solar Energy / Economics

Date posted: 07/30/15

William Pentland reports that the Tesla new storage batteries will not put your local utility out of business anytime soon. That was the take away from the Elon Musk keynote address yesterday at Edison Electric Institute annual convention in New Orleans. Industrial-scale batteries designed for peak shaving are projected to account for upwards of 90% of all Tesla battery sales, according to Musk. Rather than hurting utilities, this should help them, according to Musk. Batteries can be used to shift load, reducing peak demand. Of course, I never worried about the Tesla batteries putting electric utilities out of business. On the other hand, I have worried quite a bit about electric utilities putting Tesla and its partners in the distributed solar space out of business. It would not be the first time distributed generation has tried and failed to escape from the margins into the mainstream of our energy economy. More than a decade ago, the first wave of distributed energy technologies emerged. Almost all of those technologies ran on natural gas rather than solar. The economics were frequently more compelling than solar. In 2002, people thought that fuel cells and microturbines would be installed in every McDonald. Of course, that never happened. Utilities were undoubtedly a major part of the reason why, albeit not the only reason. In any event, if utilities are able to persuade regulators to impose special fees and surcharges on distributed energy technologies, distributed energy companies are in trouble. But, utilities are massive investment companies. They have $730 billion in outstanding long-term debt instruments. Whether we like it or not, utility customers like you and me are on the hook for paying that money back. We may not have had a say in how that money was spent, but we are still accountable.