Elon Musk, CEO of the electric car company Tesla Motors, announced at the beginning of May that the company branch Tesla Energy will be moving into large, scalable batteries for homes and businesses. The viral online response was staggering. In the weeks following the announcement, the prospect of a Tesla battery has been met with tens of thousands of enthusiastic preorders, as well a healthy dose of skepticism. But Musk’s undeniably brilliant marketing is difficult to deny. In the words of Forbes: “You’d be excused for thinking that the company had invented the lithium ion battery.”
What’s the Big Deal about the Powerwall?
With the Tesla Energy announcement, Musk unveiled the company’s plans for Powerwall: a 200-pound lithium-ion battery. Powerwall is a scalable energy solution device designed to improve energy usage and lower costs for businesses and homeowners. It is a single, characteristically sleek-looking unit.
Musk said, in a much-quoted segment of his announcement, “Our goal is to fundamentally change the way the world uses energy at the extreme scale. We’re talking at the terawatt scale.”
According to Musk in his announcement, the battery would serve as a source of backup power. The battery could also be combined with residential solar energy to power houses in an environmentally friendly, efficient manner.
The price tag on this trendy, innovative device is not as big as it could be, coming from the luxury car designer. For the ten kWh model, the price is $3500 in preorders; for the seven kWh model, that amount comes down to $3,000. Especially with the possible long-term savings in energy costs, the price for such a device from Tesla is far from discouraging for keen buyers.
However, according to the financial-services company Motley Fool, that initial price tag may be misleading. The products are, after all, only batteries: they need inverters to work. The site quotes SolarCity’s installation cost for the Powerwall as coming in at $5000 with the inverter included.
A Gigafactory: Tesla Energy’s Answer to Supply and Demand
The demand for the new Tesla batteries has already far surpassed the company’s ability to supply them, as Musk admits. Fortune quotes the CEO as calling demand for the batteries “crazy off the hook.” He continues, “There’s like no way we could possibly satisfy demand this year. We’re basically sold out through the middle of next year.” At the time of that statement, there had been almost forty thousand preorders for the batteries.
To answer this unmet demand, Tesla plans to build a gigafactory in Nevada. The gigafactory is a revitalized and reimagined production space from the minds of Tesla’s innovators and designers. Fortune has quoted Tesla’s announcement of it at length:
“We think of the gigafactory as a custom-made machine. We’re designing the gigafactory the same way we designed the Model S, as though it was a very giant car. It’s a fundamentally different way of approaching manufacturing engineering than traditionally done. So the machines that are going into the gigafactory are all custom designed for that facility. And so what we really have is gigafactory version 1. We always think of the gigafactory as a product of Tesla’s. And we expect to make many gigafactories.”
Tesla will presumably introduce new production methods and technologies in that “custom-made machine,” which can only have increasing, ripple-effect benefits to the production cost of its luxury-priced electric cars.
Fitting the Giant Battery into Tesla’s Public Image
Tesla is an exciting and beautiful brand behind energy-efficient products. As usual, Tesla has its enthusiasts—and doubters. Motley Fool sees a battery company in Tesla Energy, and not much more. It writes:
“The real value is in the software that knows when to charge and discharge the battery, generating revenue or cost savings for customers. This is what companies like EnerNOC, Stem, SunPower and even SolarCity are really selling to customers, not just a battery. In most C&I [commercial and industrial] cases, they don’t care whether the battery has a Tesla logo or is in a steel cage in the basement; they want to know how to make money off it. It’s uncertain how Tesla will add that value outside of selling a battery on the C&I level, and in the residential space there are few places where an economic justification for energy storage can be found today.”
Basically, the large companies that would benefit most from the Powerwall probably won’t be swayed by the hype behind it.
Forbes, meanwhile, thinks that Tesla’s characteristic flare is totally uncalled for in such an unglamorous product that is, after all, nowhere nearly as sexy as a Tesla car:
“Beautiful engineering and perfect human interaction certainly matters when it comes to a car. User interface matters in a host of devices and appliances like your smartphone, computer, TV, refrigerator, microwave oven. You willingly pay more for something that is a joy to use. But a backup battery system? That should be something that sits in the closet and works seamlessly with the rest of your household power system. Like a water heater. There should be no reason to look at it, let alone interact with it.”
Musk’s marketing flare even in the face of early skepticism shouldn’t be dismissed so quickly, however. After all, it’s already working better than Musk himself had anticipated. While the battery may not be as revolutionary as other tech products we’re used to seeing from Tesla, Musk and the gigafactory may well make up that difference in droves, both supporting the company’s innovative image and expanding its infrastructure.
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