Elon Musk wants the people to know that he’s not quite the rebel some have made him out to be.
“I'm not actually a fan of disruption for it's own sake,” the CEO of Tesla Motors said yesterday at the Edison Electric Institute’s (EEI) annual convention for investor-owned utilities in New Orleans.
“I don’t think we should disrupt things unless it’s…fundamentally better for society,” he said. “I'm not really a fan of disruption; I’m just a fan of things being better.”
Musk’s message is likely to be well received by the electric utility industry, which EEI leaders acknowledge is “in the midst of a profound transition.” Rather than characterize utilities as laggards and make a call for action, Musk and Tesla CTO JB Straubel underscored that utilities are already, and will continue to be, one of Tesla’s biggest allies.
That’s perhaps an unexpected message coming from the young company looking to revolutionize the auto industry with high-performance electric vehicles. It's also the company that recently launched and popularized an affordable home battery, which when coupled with solar could significantly reduce utility profits -- and theoretically, if sized large enough, could enable customers to disconnect from the grid.
But if you ask Straubel, the notion that Tesla is working against utilities is just a storyline fabricated by the press.
“A very popular message that people want to show is ‘Elon, the disruptor' and ‘Tesla Motors, the disruptor.’ But it was never our goal to disrupt for the fun of it. That’s not very productive, for the world or for anything,” Straubel said in an interview at the EEI convention.
“It’s really that we want to drive change based on what technology can allow and accomplish,” he added. “We hope that that’s as least disruptive as possible.”
Utility-scale storage to make up 90 percent of Tesla battery sales
The best applications for energy storage are where it can benefit the grid as a whole -- either as backup power, for load shifting, peak load management, or one of several other services, according to Straubel. Whether or not it’s utility-owned, he sees utilities controlling how most energy storage is deployed and how it operates.
“I just don’t see a big exodus of people that are going to buy batteries and then disconnect from the grid,” he said. “That is technically possible, but it’s not the most rational approach in most cases.”
Plus, while there’s been a lot of hype around the Powerwall, Tesla’s sleek, consumer-facing battery, the company expects to see far greater sales of the Powerpack, its 100-kilowatt-hour battery blocks that can be linked to reach megawatt-hour scale.
“We expect that 80 if not 90 percent of all the stationary storage we sell will be the Powerpack, not the Powerwall,” said Musk.
Tesla has already announced deals with a handful of utilities, including Oncor, Southern Company, Green Mountain Power, Reposit Power and Vector Power in Australia, and Gaelectric in Ireland. Tesla announced its biggest single-customer sale last week to the San Francisco startup Advanced Microgrid Solutions, which has a contract to deploy 50 megawatts of batteries in Southern California Edison’s territory.
Straubel said that Tesla is currently in conversations with several other utilities. But discussions don’t necessarily amount to deployments. Just how quickly utilities will embrace Tesla batteries at higher volumes is unclear.
Baird Equity Research released a report yesterday that found a clear economic case for Powerpack sales in the near term to commercial customers like Amazon, Target and Wal-Mart. The firm said Powerpack sales to utilities represent another major opportunity, “albeit lumpy business.”
SolarCity gives battery prices that "were not correct"
While Tesla execs see utility-scale applications dominating their business, residential sales are still expected to be significant. Even if Tesla taps only a couple percentage points' worth of the houses in the U.S., that could still amount to a few million battery sales.
Tesla offers two Powerwall options at two different price points that perform two different functions. The 10-kilowatt-hour unit with an installer price of $3,500 is designed to provide home backup power, and the 7-kilowatt-hour unit with an installer price of $3,000 is designed for daily cycling to balance the generation of rooftop solar. Musk expressed frustration with journalists who conflate the two products.
Musk was also critical of SolarCity -- a company he chairs -- for the battery costs the solar company cited. CTO Peter Rive told Greentech Media that SolarCity would price the 10-kilowatt-hour battery at about $5,000. According to Musk, some things SolarCity said “were not correct.”
“There is some installation cost, but I think [the differential] is much more modest than $3,500 to $5,000,” Straubel explained.
SolarCity and other providers factored in the costs for components beyond the battery alone, he continued. One important point is that the Powerwall only needs one inverter. The battery can connect to almost all new inverters and many older ones, so the inverter cost is not associated with just the battery, but the entire solar-plus-storage system.
“Obviously you need the inverter if you have solar or you can’t connect to the grid. The battery can leverage that exact same inverter without extra cost,” he said. “Most older batteries had to have a dedicated separate inverter just for them. [Eliminating the need for a second inverter] is part of how we reduced the price.”
Musk said he would set the record straight on Powerwall pricing on Tesla’s shareholder call, taking place today at 2 p.m. PDT/5 p.m. EDT.
Tesla's big electric opportunity
Although Musk says he wants to work with utilities, SolarCity is still one of his companies -- one that views many utilities as a fundamental threat to its business. SolarCity is clashing with power providers in several states, most notably Arizona, which stands in sharp contrast to Musk’s comments at EEI.
There’s no doubt Musk sees solar as the future for electricity generation, just as he views electric cars as the future of transportation. “The primary means of energy generation is going to solar,” he said yesterday. “It will at least be a plurality, and probably be a slight majority in the long term.”
The investment bank UBS recently came to the same conclusion. Analysts wrote that they expect solar capacity to triple between now and 2025, and again between 2025 and 2050 to eventually become “the default technology of the future to generate and supply electricity.”
But this doesn’t necessarily spell doom for utilities. Utility-scale solar will generate a large portion of future generation. And as heating and transportation sectors increasingly run on electricity in the coming years, overall electricity consumption will vastly increase, and only a portion of that growth will be distributed energy, said Musk.
“My rough guess would be that there is more than of a doubling of utility-level electricity demand in the long term,” he said.
Tesla wants to make that possible -- but in a cleaner, more localized way.