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Tesla Gives Boost to Promise of Batteries

13 May 2015 in Trading Ideas

Apple began as a maker of personal computers, but its real legacy may ultimately be as a transformative maker of smartphones.

Is it possible that iconic electric car maker Tesla could follow the same path with batteries?

Tesla, known as a maker of luxury electric sedans, recently unveiled that it is taking a big step into energy storage with a fleet of battery systems aimed at homeowners, businesses and utilities. The company’s foray into the solar storage market will include rechargeable lithium-ion battery packs that can mount to a home garage wall as well as battery blocks large enough to smooth out fluctuations in the grid.1

In a news conference before the product unveiling, Tesla CEO Elon Musk said the consumer battery, called the Powerwall, would sell for $3,500, and was derived from batteries that Tesla uses in its Model S vehicles. The device, which Tesla will start producing later this year, will be installed by licensed technicians.

According to the New York Times, energy and auto analysts have generally responded positively to Tesla’s move. “Elon thinks that there’s a long-term gain to be made or a long-term play not only in electric cars but also in electric energy storage — and he’s probably right,” Karl Brauer, an analyst at Kelley Blue Book, told the Times. “There’s a universal application for portable energy and storable energy that goes to everybody. It’s really just a matter of getting the business model together.”

Tesla’s announcement comes as energy companies are moving in the same direction. The Times noted that Sungevity, a leading solar installer, recently announced a partnership with Sonnenbatterie, a smart energy storage provider in Europe, to begin offering their systems to its customers. NRG, one of the largest independent power producers in the US, is also developing storage products.

On a global level, Tesla’s venture could begin a transformation for how energy is consumed and stored in Africa. Musk said the company had the continent in mind when it developed the wall-mounted energy source, according to a report in The Guardian.2 Just like the mobile phone allowed Africa to surge ahead in internet connectivity, so a battery pack that can power a home or business could allow Africans to leapfrog the limits of the grid, the report said.

The company has promised to release the technology into the public domain, encouraging others to develop their own models using the open source data.

Africa is the world’s most energy-scarce continent. Sub-Saharan Africa has an installed capacity equivalent to that of Spain, and half of it is in South Africa alone.

However, as The Guardian suggested, Africa could become the global center for green energy. Thanks to the expansive Sahara desert, strong winds along its coasts and its flat, arid interior, and geothermal reserves all along the Rift Valley, the continent has the world’s highest reserves of renewable energy resources.

All of which could mean a growing market for providers of clean technology products and services.

The Cleantech Everywhere motif has increased 10.2% so far in 2015. During that same time, the S&P 500 has risen 3%.

In the past month, the motif is up 0.7%, while the S&P is up 0.8%.

Over the past 12 months, the motif is down 1.7%; the S&P 500 is up 13.3%.

1Diane Cardwell, “Tesla Ventures Into Solar Power Storage for Home and Business,” nytimes.com, May 1, 2015, http://www.nytimes.com/2015/05/01/business/energy-environment/with-new-factory-tesla-ventures-into-solar-power-storage-for-home-and-business.html?_r=1, (accessed May 11, 2015).

2Christine Mungai, “Tesla’s low-cost renewable battery could revolutionise Africa’s energy supply,” theguardian.com, May 11, 2015, http://www.theguardian.com/world/2015/may/11/tesla-home-battery-transform-africa-energy.