Tesla Revolution Underway with Plummeting Battery Cost

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Tesla Revolution Underway with Plummeting Battery Cost

Tesla Motors Inc. is making a huge bet that millions of small batteries can be strung together to help kick fossil fuels off the grid.

The idea is a powerful one-one that’s been used to help justify the company’s $5 billion factory near Reno, Nev.; but batteries have so far only appeared in a handful of true, grid-scale pilot projects.

Three massive battery storage plants built by Tesla, AES Corp., and Altagas Ltd. are all officially going live in southern California at about the same time.

Any one of these projects would have been the largest battery storage facility ever built.

They amount to 15 percent of the battery storage installed planet-wide last year.

The new battery projects were commissioned in response to a fossil-fuel disaster; the natural gas leak at Aliso Canyon, near the Los Angeles neighborhood of Porter Ranch.

The battery storage industry, a key part of the plan if wind and solar power are to ever dominate the grid, is less than a decade old and still relatively small.

Until recently, batteries were many times more expensive than natural gas “Peaker” plants that fire up to meet surging demand in the evening and morning hours.

Prices for lithium-ion batteries have fallen fast by almost half just since 2014.

Tesla Revolution Underway with Plummeting Battery Cost
Source: Bloomberg New Energy Finance

Electric cars are largely responsible, increasing demand and requiring a new scale of manufacturing for the same battery cells used in grid storage.

California’s goal is considerable, but it’s dwarfed by Tesla’s ambition to single-handedly deliver 15-gigawatt hours of battery storage a year by the 2020s; enough to provide several nuclear power plants worth of electricity to the grid during peak hours of demand.

Battery costs and profitability for utilities are difficult to evaluate.

Battery plants take up a much smaller footprint than gas-powered plants, they don’t pollute, and their instant response can provide valuable services better than any other technology.

The total installed cost of a battery plant would need to fall to about $275 per kilowatt hour.

The battery’s day is coming, while those of natural gas peaker plants are numbered.

That’s the prediction of John Zahurancik, AES’s president of battery storage.

Zahurancik is one of the pioneers of energy storage, having cobbled together profitable edge-case storage projects since 2008 when battery prices were 10 times higher than they are today.

The biggest thing that sets Tesla and AES apart is that Tesla is building the components of its storage units itself at the company’s Gigafactory in Reno, including battery cells with partner Panasonic, modules, and inverters.

For now, gas peaker plants still win out on price for projects that aren’t constrained by space, emissions, or urgency, said Ron Nichols, President of SCE, the California utility responsible for most of the biggest battery storage contracts.