Tesla Readies GigaFactory for New Batteries
February 25, 2014
Germany and California have begun mandating and incentivizing battery production for storing grid electricity, the same dynamic that has caused solar photovoltaic prices to drop dramatically in recent years.
Now, a leading edge private initiative to create disruptive change in the energy storage space.
Tesla has reworked the ex-GM/Toyota NUMMI plant in Freemont, California into a high-tech electric car factory, but it may soon outgrow the place. The company–which has built about 30,000 Model S sedans so far–has previously hinted at a larger plant that would coincide with plans to ramp up production.
Tesla Motors [NSDQ:TSLA] CEO Elon Musk elaborated on these plans in a recent shareholder letter. He described a “Giga Factory” that would build battery packs for a future mass-market electric car. Tesla currently buys individual battery cells from Panasonic, but under the new scheme it would start with raw materials and finish with complete packs.
“This will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation,” Musk said in the letter.
The Gigafactory will take in the raw materials for lithium batteriesand put out finished packs, not only for the electric vehicles made by Tesla and its automotive customers, but also for massive amounts of renewable energy storage – that’s a niche the company plans to begin to occupy sometime early next year with residential-sized products. The production volume is expected to be at least 30 gigawatt-hours-worth per year. That’s more storage than all the lithium battery factories in the world combined produce now. Color us impressed.
Now, you might be thinking, “Is it really necessary to go that big at this point in time?” In a word: yes. Tesla CEO Elon Musk has said its upcoming, more-affordable vehicle – widely expected to be called the Model E– will wear a $35,000 price tag and boast a battery big enough to take it 200 miles on a charge. To achieve this, the cost of the cells needs to come down dramatically, and so it’s no coincidence that the time frame for the new facility will parallel that of this car. According to Musk, the benefits from the economies of scale will see a cost drop between 30 and 40 percent.
Of course, historically high prices are one of the main reasons why battery storage has not been widely used in the renewable energy sector, so this development could help drive more demand for cleaner, affordable energy, which, in turn, will drive demand for more storage. That’s the kind of vicious cycle we like to see.
Speaking of renewables, that is where the Gigafactory will get much of its needed energy. During the call with financial analysts that accompanied the release of its 2013 fourth quarter earnings report, Musk mentioned that the new plant will be “heavily powered” by wind and solar energy, and will also use older Tesla packs for storage. These will help deflect the traditional arguments against wind and solar, that the sun doesn’t shine at night and the wind doesn’t always blow.