Energy storage, when combined with solar power, could disrupt utilities in the US and Europe to the extent customers move to an off-grid approach. We believe Tesla’s energy storage product will be economically viable in parts of the US and Europe, and at a fraction of the cost of current storage alternatives.
Energy storage, specifically Tesla’s product, could be disruptive in the US and Europe, but is less likely to be economic in the rest of the world. Given the relatively high cost of the power grid, we think that customers in parts of the US and Europe may seek to avoid utility grid fees by going “off-grid” through a combination of solar power and energy storage. We believe there is not sufficient appreciation of the magnitude of energy storage cost reduction that Tesla has already achieved, nor of the further cost reduction magnitude that Tesla might be able to achieve once the company has constructed its “Gigafactory,” targeted for completion later in the decade. While “off-grid” applications are the most disruptive use of energy storage, we note that there are also less disruptive applications such as strengthening the grid to compensate for the variability of solar output.
Even at the Base/Bear cost of $10,000 for 25+ years of power, it seems like a no brainer for most households. With solar companies already financing the upfront costs, it would seem like cost reductions against a increasing grid market will flip the switch soon. Add in the cost of auto fuel savings when using electric cars and it is even more enticing.
TSLA shares are up today in early trading.