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EV maker Tesla eyes utility, power gen sectors

07 Mar 2014  | Paul Buckley

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Tesla Motors announced last week some of its future plans, including the $5 billion Gigafactory, which is expected to house some 6500 employees in a plant with a total area of 10 million square feet.

By 2020, the company is forecasting the Tesla vehicle volume would be at 500,000 per year with the Gigafactory's cell output estimated to be 32GWh/yr. The 2020 Gigafactory pack output is forecast to be 50GWh/yr.

Tesla also revealed a process flow diagram that indicates how the company plans to bring several key phases of battery manufacture all under one roof, where traditionally lithium-ion batteries would be put together using at least three different manufacturing plants.

Tesla says that the company and its partners (which are still to be revealed) will invest $4 billion to $5 billion in the Gigafactory through to 2020 with capital expenditure being shared by Gigafactory partners. Tesla has revealed the company plans to directly invest about $2 billion in the project. The Gigafactory's projected timeline will see facility construction start some time in 2014 with the aim to start manufacturing batteries in 2017.

Where is the roadmap heading?

Although Tesla Motors initially started being focused on the electric vehicle market. The Gigafactory concept is already reminiscent of Henry Ford's early factory scale and vertical integration plans that halved the cost of internal combustion-based cars at a stroke. But it is clear now that the company is looking to embrace a number of other major industry sectors in its roadmap for the future. For example, the Gigafactory already shows the company's intent to become a major global battery manufacturer.

And it is certain that other sectors are being lined up. Tesla Motors' CEO Elon Musk has seen the company's share price soar by 619 per cent in the past year. A number of strategic briefings that have generated a spate of news stories have skilfully fuelled the dramatic share price growth and speculation about the company's future plans. The 'Gigafactory' declarations are the lastest in a string of 'leaked' reports.

Grid-scale storage opportunities

On the same day Tesla announced plans to invest as much as $5 billion in the world's largest battery factory, the company also revealed its development of a battery to store power for homes, commercial sites and utilities.

Tesla's Li-ion batteries cannot just power EVs, they can also provide peak power substitution in the grid-scale storage industry. After all, Li-ion batteries are already used for frequency regulation. The market for storage-based peak power substitution is at least 20 times larger and paves the way for an attack on the utility power generation industry.

Globally speaking, about 30GW of new peaking capacity is added every year to match the demands of population growth. At an average cost of $1 million a megawatt this equates to a $30 billion annual market. Musk has already stated he believes the cost of Li-ion batteries can drop to $100 per kWh, which makes them a ready-made solution to peak demand energy storage.

Vehicle-to-grid prospects

The Gigafactory battery plans already show that Tesla is not content to be viewed as just an EV company. Nor will Tesla be satisfied just becoming a global scale Li-ion battery manufacturer or a renewable energy storage company.

It seems that Musk is looking to position his empire to take on one of the largest and most profitable industries in the world: the utility and power generation sector. After all that, he also has up his sleeve the prospect in future of using EVs for vehicle-to-grid (V2G) and vehicle-to-building (V2B) applications.

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