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Wednesday, October 29, 2014

Tesla & SolarCity usher in the New Energy Era

At some point late in 2013, I think the future business plans for SolarCity and Tesla Motors were mixed together. The page that said "Gigafactory" slipped from one to the other and now they both have a Gigafactory in their future.

Together these two gigafactories will reduce the cost of solar panels and energy storage. These factories, along with the wave of competition and copycats that they kick-off, will create the new energy era of 2030.

Let's look at each of these planned factories and their impact.

Tesla Gigafactory

Tesla is building a massive battery factory in Nevada. The figure below gives you some perspective on the size of the planned Tesla Gigafactory.

This comparison shows the size, but it is a bit of a cheat in that it is comparing the *footprint* of the factory to the *profile* of the other buildings. Below is a comparison of just footprints:
I'm not sure why the above figure (from Reddit) includes a banana on the right, but the comparison to the 80,000 seat Dallas Cowboys' football stadium is telling. This will be a massive factory.

Tesla expects their battery cost to be reduced by 30%. The output of the factory is expected to be 35 GWh/year of cells and, with additional cells from their partner Panasonic, 50 GWh/year of battery packs.

There are the numbers, but what does that mean? Let's put it in perspective, this is more battery capacity than all the factories in the world made in 2013. That is worth reiterating. This factory will produce, under one roof, more batteries than all the factories in the world made in 2013. This is enough battery capacity for:
o 22 billion iPhone 5s
o 1.2 billion iPad Retinas
o 2 Million Nissan Leafs
o 588,000 Tesla Model S P85D

More on the Tesla battery factory later, let's look at the solar gigafactory.

SolarCity Gigafactory 

The SolarCity Gigafactory will be located in Buffalo, New York at the High-Tech Manufacturing Hub. It is a one million-square-foot site.

SolarCity intends to build a factory with 1 gigawatt of annual solar capacity. The modules will be highly efficient and have the lowest cost per installed kilowatt of any on the market. Depending on where it is installed, 1 GW of panels could generate 1 terawatt-hour of energy annually. This is enough to power over 85,000 US homes each year it is operational.

SolarCity's Silevo Solar Cell
According to SolarCity's press release, the company will spend $5 billion on their gigafactory over the next 10 years.

Putting Them Together 

Solar panels that generate energy and batteries that can store that energy are a natural fit. There are many ways that these can be used together. The Tesla battery gigafactory and acres of the desert around it will be covered in SolarCity's panels. Many of the Tesla supercharger stations will have SolarCity panels. These minor cooperative efforts are nice and to be expected considering the relationship between the companies, but this is just the camel's nose.

In late 2013, SolarCity started offering energy storage systems to businesses using Tesla batteries. The system has energy management software that stores energy when there's surplus and supplies energy during peak times to avoid demand charges and peak rates. Soon we could see projects that allow the utilities to buy this stored energy when they need it, thereby increasing their operating reserve. Another clue to what's to come.

Creating the New Energy Era 

It is easy to see how energy storage and solar are complementary, but the real disruption here is the scope of these two factories. Together they will reduce the cost of solar and energy storage to the point that they are game changers. By 2030 things will be radically different. The combination of the Tesla and SolarCity gigafactories could make the next great energy powerhouse.


The combination of Tesla & SolarCity could be the next energy powerhouse. 

Energy Generation 2030

Cheap energy storage means that renewable energy can be the primary supply for the power grid. Intermittent sources, such as wind and solar, are easily managed when there is energy storage that buffers generation from use. This energy store can be tapped as needed, on-demand, with no spin-up delay. Energy will become "digital". Once we hit this digital-energy tipping point, all new generation plants that utilities bring online will be renewable. With renewable generation there is no need to pay for ongoing fuel costs, waste disposal, or emission controls. Fossil fuel burning and nuclear will just not pencil out for cost and the "baseload" argument is moot once massive grid-scale energy storage is viable.


Cheap industrial-scale batteries will make energy "digital". 

This might sound like a radical shift in energy production but the trends are already starting. The cost reductions in solar and storage will hasten the transition.

Cheap solar panels will mean that any building with an unshaded roof will be a candidate for solar. For example, if you could install solar panels and a scaled-to-fit energy storage system on your home or business, that cost you nothing upfront and this allowed you to pay for all of your electricity at off-peak rates, there are clear economic benefits, it's a no-brainer. Most people would jump at a chance to reduce their electric bill.

Transportation 2030

As batteries become cheaper, plug-in vehicles become cheaper, have longer range, and grab more market share. This also allows batteries to be used in more vehicle types. Today BYD is making electric buses and there are electric garbage trucks on the roads in Chicago and Beijing.

Elon Musk has stated by 2030 that 50% of all new vehicle production will be fully electric. I have made my own prediction here. In my prediction, I did not distinguish between plug-in hybrids and fully electric vehicles. I predicted that 50% of all new vehicle sales will be plug-in vehicles in 2035. So I am only slightly more pessimistic than Mr Musk, but we are in the same general ball-park. Plug-in vehicles have clearly crossed the chasm by 2030 and are clearly on their way to market dominance.

Not only will batteries become cheaper, they will become lighter. Currently, Li-ion batteries store about 300 Wh/kg. Today this allows for expensive ~200 mile range cars. Battery energy density is improving at about 8% per year. Assuming this general rate continues, things start to get very interesting when the technology crosses the 400 Wh/kg milestone in ~2020.

The 400 Wh/kg milestone is significant because it will allow EVs to be lighter while still carrying a significant energy capacity. This will result in longer range without increasing the capacity. According to Car & Driver, the 2013 Tesla Model S 85 battery pack weighs 1323 pounds. A 30% reduction in pack weight would remove 400 pounds from the car. This would improve the acceleration, range, handling, and braking without any other changes to the car.
2013 Battery Pack Comparison
Let's look at air travel.

Today there are small experimental electric aircraft. At the 2014 Berlin Air Show Airbus demonstrated their E-Fan two-seater electric aircraft shown below.


Smaller aircraft, such as the Embraer Regional Jet and twin-turboprop commuter lines, will likely be among the first commercial planes to be electrified. Airbus has already demonstrated that they want to lead in this space even if it takes a radical redesign of planes.

As the fuel savings for these smaller aircraft becomes apparent, the technology will move up the ranks.

With 400 Wh/kg batteries, it is possible to have battery powered coast-to-coast commercial airline flights. At 700 Wh/kg (in ~2030), it would be possible to have battery powered intercontinental flights.

Where Does It End?

Battery technology will continue to improve. They will get lighter, cheaper, charge faster, and last longer. Our current chemistries will, eventually, be replaced by lithium-air, solid state, or another breakthrough. These will be refined and eventually displaced by ultracapacitors or a yet-to-be imagined storage system.

This improved energy storage will drive development and new applications in transportation and energy management. By 2070, all transportation (except rockets) will be electrically powered from renewable energy.

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