Tesla and other battery companies have launched an arms race to expand their production facilities in an effort to bring costs down.

Questions remain about how soon the new factories will have an effect on pricing for end customers and how pronounced that effect will be. In the estimation of Francesco Venturini, who oversees 36 gigawatts of renewables as CEO of Enel Green Power, oversupply of batteries could hit as soon as early 2018.

“Cost is dropping faster than what everybody predicted, so it seems like it's following the same path that PV has shown in the past 10 years,” he told GTM during a visit to Berkeley to kick off an innovation hub. “I'm a believer. I see a lot of build-out of new factories around the world; I see right now the potential for having some overcapacity in the market, which is a good thing if I look at it as an IPP.”

It wouldn’t be news to hear rosy projections of storage cost declines from a battery maker. Venturini, though, has a unique vantage point on the industry.

Enel recently acquired the American energy storage developer Demand Energy to help expand the Italy-based utility’s global storage portfolio. The company is moving beyond pure renewables generation business to storage-assisted generation and potentially standalone storage.

The profitability of that new venture, and the efficacy of adding additional variable generation to the grid more broadly, rests very much on the prices the company can get to buy the batteries they install.

Tracking those prices requires breaking down the causal steps that flow from new factory construction. The supply curve here is about as smooth as a saguaro cactus: Each new factory coming on-line causes a surge in the batteries produced in a given month.

If demand for electric vehicles surges in parallel, there will be a ready market for all those new batteries. If EV demand doesn’t grow quite that much, those manufacturers will need to dump their surplus products somewhere. Stationary storage developers will be only too happy to oblige.

We’ve seen this dynamic at work in the past couple years, with underutilized battery production and slower-than-expected EV demand driving down stationary storage prices. In fact, we're already in a moment of battery oversupply, said Ravi Manghani, GTM Research's energy storage director. Existing plants don't have enough demand to operate at full capacity just yet.

What’s changing is the scale of production. As the giga-producers of the world -- names like LG Chem, Samsung, Panasonic -- race each other to increase manufacturing capacity, the rate of production is primed to increase further still.

“You need big volumes to be competitive -- to stay alive, you keep building capacity,” Venturini said. “Who benefits at the end? Usually it's the consumer, which is great.”

Granted, there are some differences between the silicon photovoltaics and battery production, Manghani notes. PV module-makers require silicon, an abundant resource, but they need a refined version of it; once the industry invested in more plants to produce high-purity silicon, "the price plummeted like a stone," he said.

The lithium-ion battery supply chain isn't as simple. "Raw materials are the biggest cost, but it’s not a single raw material that accounts for the majority of the cost," Manghani said.

Lithium is just one part of the puzzle. In the lithium nickel manganese cobalt oxide chemistry popular among electric car makers, those non-lithium components are rarer and more costly, and each has its own supply chain.

As such, Manghani expects battery costs to drop over the next few years, but not as fast as the PV modules did in their free-fall heyday. He estimated a rate of 30 to 40 percent cost declines over the next two years, similar to what we've seen in the past two years.

That'll cause manufacturers to scramble for any advantage over their peers, who will also be scrambling to undercut their competition on price. For customers, this turmoil will likely manifest itself as an increasingly favorable deal.