Solar City to Make Battery Backup Standard
September 22, 2014
At a private shindig in little town called New York City last week, SolarCity CEO Lyndon Rive and Chairman Elon Musk (Lyndon’s cousin and also the CEO, Chief Product Architect, and Chairman of Tesla Motors) made a few casual but potentially world-changing announcements, as is practically a habit with Elon.
Most notably, they stated that SolarCity would be including battery backup systems with every single one of its rooftop solar power systems within 5-10 years. Many of those, but not necessarily all of them, would come from Tesla’s planned gigafactory.
Even with the battery backups, Lyndon and Elon contend that a SolarCity installation will cost less than the price of electricity from the grid!
For Tesla Motors, the leap from a mobile EV battery to a stationary battery package for businesses is a logical move, now that its production costs are on track. Tesla co-founder JB Straubel explains:
The economics and scale that Tesla has achieved in the automotive market now make stationary energy storage more cost effective and reliable than it has ever been in the past. We expect this market to grow very rapidly now that we have crossed this economic threshold.
Rive and Musk, who are cousins, also said at the New York event that within the same time frame electricity from solar power would become cheaper in the U.S. than power produced from natural gas. To meet that target, the pair both plan to build two major manufacturing operations that will feed off each other. One of Musk’s other companies, Tesla Motors, announced plans earlier this month to build a vast factory for producing lithium-ion batteries in Nevada (see “Does Musk’s Gigafactory Make Sense?”). This factory will supply batteries for its electric vehicles as well as to Solar City. While some lithium-ion batteries and solar cells are made in the U.S. today, the vast majority are made in Asia.
Both companies’ manufacturing plans are ambitious but also risky, given the recent track record of U.S. energy companies, and because unexpected technology advances could quickly render the components produced in those plants outmoded. In the case of solar panels, there is also the continued threat of heavily subsidized competition from China. For both companies, the bet is that rapidly growing demand will allow new economies of scale to lower the cost of manufacturing these components, which in turn will lower the cost of solar power.
Although Solar City has only one small factory so far, it’s negotiating with New York State and potential partners to fund one about as big as the largest one in Asia. Rive says he plans to follow this with factories 10 times as large. At such a scale, assuming solar cell efficiencies can be steadily improved, the cost for installed solar panel systems would be cut by about half, from $2.30 per watt to $1.20, Rive says.
In the 1980s, leading consultants were skeptical about cellular phones. McKinsey & Company noted that the handsets were heavy, batteries didn’t last long, coverage was patchy, and the cost per minute was exorbitant. It predicted that in 20 years the total market size would be about 900,000 units, and advised AT&T to pull out. McKinsey was wrong, of course. There were more than 100 million cellular phones in use 2000; there are billions now. Costs have fallen so far that even the poor — all over world — can afford a cellular phone.
The experts are saying the same about solar energy now. They note that after decades of development, solar power hardly supplies 1 percent of the world’s energy needs. They say that solar is inefficient, too expensive to install, and unreliable, and will fail without government subsidies. They too are wrong. Solar will be as ubiquitous as cellular phones are.
Futurist Ray Kurzweil notes that solar power has been doubling every two years for the past 30 years — as costs have been dropping. He says solar energy is only six doublings — or less than 14 years — away from meeting 100 percent of today’s energy needs. Energy usage will keep increasing, so this is a moving target. But, by Kurzweil’s estimates, inexpensive renewable sources will provide more energy than the world needs in less than 20 years. Even then, we will be using only one part in 10,000 of the sunlight that falls on the Earth.
In places such as Germany, Spain, Portugal, Australia, and the Southwest United States, residential-scale solar production has already reached “grid parity” with average residential electricity prices. In other words, it costs no more in the long term to install solar panels than to buy electricity from utility companies. The prices of solar panels have fallen 75 percent in the past five years alone and will fall much further as the technologies to create them improve and scale of production increases. By 2020, solar energy will be price-competitive with energy generated from fossil fuels on an unsubsidized basis in most parts of the world. Within the next decade, it will cost a fraction of what fossil fuel-based alternatives do.