The German home battery startup Sonnen is expanding its U.S. footprint with a significant investment in a new North American Innovation Center in Atlanta, Georgia.

Sonnen announced today that the InnovationHub will bring all of the company’s U.S. product development and manufacturing capabilities under one roof, allowing for new product innovation and the ability to rapidly scale up production capacity.

“Sonnen U.S. has experienced exponential sales growth over the past year, making the Sonnen InnovationHub a smart investment to capitalize upon the immense potential of the North American energy storage market,” said Christoph Ostermann, Sonnen Group CEO, in a statement. Bringing the company’s U.S. manufacturing and R&D teams into one facility will “enable us to better adapt to the future needs of the high-growth U.S. residential energy storage market.”

In an interview earlier this month, Ostermann said U.S. monthly sales had recently reached triple digits -- growing threefold in December alone. Those sales lag well behind Sonnen’s home market in Germany, where the company has sold more than 15,000 battery storage systems to date, but they still position Sonnen as a leading residential storage company in the U.S.

The InnovationHub is no Tesla Gigafactory -- but that’s by design, said Blake Richetta, vice president of Sonnen’s North American sales, and former sales manager at Tesla. While Sonnen is focused on scalability, the new factory is part of a concerted strategy to “grow smartly,” he said.

“We're not going to make [the factory] so that it's able to build thousands and thousands of units right away,” said Richetta. “It’s going to be what it needs to be to foster innovation and for our current level of production needs, and then we're going to have an open-ended footprint to be able to grow.”

Betting on precision over mass production

The mission behind the InnovationHub is to make Sonnen the leader in residential renewable energy storage.

“So what does that mean?” said Richetta. “That doesn't mean building a battery, because there are all kinds of major companies that can build batteries. That means putting a system together that operates perfectly with the solar array, with the electricity in your home, with utilities, and that solves all these questions that people don't know how to answer in the United States. It means creating a premium system with software on top that allows you to have smart home energy management.”

Being the market leader is not necessarily about “building tons of stuff and trying to get it cheap,” he added. The goal isn’t just to be cheap; it’s to provide the best value. For Sonnen, that means leaving the mass manufacturing to suppliers, while focusing on precision and innovation in-house.

“In other words, we don't think you need a massive factory with the cheapest battery to make residential renewable energy storage work right now,” said Richetta. “You actually need a system that does residential renewable energy storage.”

Unlike Tesla, which sells solar, makes cars and produces batteries of all sizes, Sonnen is zeroing in on the residential energy storage market and staking its future on having the best dedicated product in the space. The question is whether that business model can scale.

Tesla opted to take a risk and start big right out of the gate. CEO Elon Musk launched a mission to build not only the world’s largest battery factory, but the world's largest factory of any kind, and has already spent more than $1 billion to see the Gigafactory come to life. The Nevada facility came on-line in January and already employs more than 1,000 people. By 2018, Tesla plans to achieve 35 gigawatt-hours of cell production for both stationary and electric vehicle use, and 105 gigawatt-hours of cells at peak output. Through scale and a strategic partnership with Panasonic, Tesla has been able to bring battery prices down to record lows.

Sonnen, meanwhile, is taking a more specialized and measured approach. The company didn’t release investment or production numbers for the new manufacturing plant, because there are no specific targets. “We're going to be looking at it quarterly; we're going to be modularizing this,” Richetta said. That approach could prove wise, as long as Sonnen can keep pace with competitors on cost.

One of the main differences between the Sonnen and Tesla is that the former offers an integrated home battery solution, while the latter requires a separate inverter and is rumored to have a complicated installation process. But that could change when the inverter-integrated Powerwall 2.0 comes to market, sized at 14 kilowatt-hours for $5,500, which compares to Sonnen’s 4-kilowatt-hour battery priced around $10,000.

Richetta said that Sonnen’s software performance, the SonnenCommunity program, ease of install, safe battery chemistry and proven track record in Germany still make it a far more compelling purchase overall -- and that the sales numbers prove it. But Sonnen can’t ignore cost. As the company builds out the new InnovationHub, it will need to keep the focus on cost-competitiveness front and center.

Some of those cost reductions will need to come from the company’s suppliers. “We’re going to continue to lean on other manufacturers,” said Richetta. Sonnen currently uses lithium-iron phosphate batteries made by Sony, but it is technology agnostic, and is currently in talks with other possible providers, Richetta said.

Why the Peach State?

When Sonnen entered the U.S. market a year ago, the company established its headquarters in Los Angeles and contracted with a battery manufacturer in Northern California. It also opened an R&D facility in Atlanta.

The company decided to set up an office in Atlanta because of connections between Sonnen’s chief technology officer and the engineering community from Georgia Tech and the industry. Sonnen chose Atlanta for the InnovationHub in order to access the talent pool, and for easier access to attractive the East Coast markets, including New York, Massachusetts and Florida.

While California and Hawaii are often considered the most attractive home battery markets because of their high solar penetration levels, a singular focus on the West Coast overlooks the value plays in other states, said Richetta.

“The idea that California is king is actually more around king of the current state of the solar industry, not the future of the solar industry,” he said. “We still have full net metering and we're still struggling to get time-of-use rate plans in parts of the state. […] So I would say that when it comes to solar-plus-storage, let’s look at the broader picture around the country.”

Florida, for instance, may not have the best policies and rate structures for distributed solar, but it does have a very big need for grid stability when it comes to tropical storms. “We actually do significant business in Florida, because the small solar industry that is emerging in Florida is very excited about the idea of solar-plus-storage and energy security,” said Richetta. “They can sell that a lot easier than can a Californian solar installer.”

Another benefit to expanding in Atlanta, is that it will bring new cleantech jobs to the Southeast, at a time of political uncertainty and high demand for manufacturing work.

"We're investing in the U.S." said Richetta. "And we're very excited."