Tesla Bears Fear This Metric

Renewable Energy (Other Energy Resources) / Economics, Batteries

Date posted: 03/18/16

Michael McDonald opines that despite the fact that Elon Musk has built his company up from nothing amid extremely trying circumstances, while simultaneously upending the rocket industry with SpaceX, many investors continue to scorn Tesla. It was little surprise then that the Tesla announcement of its grid-scale battery systems was greeted with skepticism and outright derision in some quarters of the market. Tesla bears may come to rue that dogmatic view. Musk described demand for his batteries as crazy off-the-hook, and a recent report backs up that colorful assessment. The U.S. deployed 112 megawatts of energy storage in the 4th quarter of last year alone, bringing the total for 2015 to 161 megawatts. That figure is particularly remarkable in the context of the fact that there were only 221 megawatts of total storage in the entire country at the end of the year. Essentially that means that more than 70% of all energy storage in the U.S. was installed in 2015. This sequence of facts suggests the market is in its infancy and growing. The U.S. generates about 4.093 billion kWh of electricity annually, so the installed storage base is very small. But, the situation will remain that way for very long. Many investors scoffed at the Tesla proposed battery system arguing that it was too expensive for homeowners. That is largely true, but also largely irrelevant. The real bulk in the energy storage market is from the utility-scale portion of the market. From traditional utilities to solar and wind farms, almost everyone in the power business is interested in energy storage. Peaker power plants are expensive to build and utilities are interested in moving away from that model. Doing so would allow many utilities to produce (or buy) energy overnight and then sell it to consumers during peak hours at a hefty mark-up.