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Hot Topic: Could Tesla’s Gigafactory and energy storage facilities lead to a flourishing battery storage market?

Friday, February 3, 2017

Tesla’s new projects may lead to a boom in the production of lithium batteries and a change for the world storage market


In February 2017, Tesla Motors, Inc. officially changed its name to Tesla, Inc., where dropping the “Motors” demonstrated the gradual transformation from a solely electric vehicle (EV) production company to a RES and energy storage development and manufacturing corporation. The growing ambitions of Tesla’s CEO, Elon Musk, outside of the motor industry became evident with the purchase of solar-panel manufacturer SolarCity (see news of 01 August 2016: ‘Tesla Motors and SolarCity agree on merger price’) and the signature of a contract for solar modules’ manufacturing with Panasonic (see news of 16 December 2016: ‘Tesla and Panasonic sign solar panel deal’).

Now, there is a new potential game-changer for Tesla and the energy storage market as a whole: the turning on of another part of what is to become the world’s biggest factory for the manufacture of RES modules and EVs, namely the $5 billion (€4,6 billion) Gigafactory 1 in Nevada, US. In July 2016, the first part of the Gigafactory was opened and just six months later in January 2017, another part started production. This became Tesla’s main lithium-ion battery production plant, also providing the battery modules for the world’s newly opened largest battery storage facility in California, US. The battery storage facility was developed in cooperation with Southern California Edison and has around 400 Tesla PowerPack units installed. With falling prices for lithium-ion batteries in the last two years due to a flourishing market for EVs, the battery storage technology, essential for wind and solar energy, has become more viable.

Additionally, in 2016, Elon Musk announced his plans for the expansion of Tesla’s battery production and energy storage facilities through the creation of Gigafactory 2 in Europe. The location for the construction of the new facility will be announced later in 2017. Meanwhile, Tesla’s European competitors are also seeking opportunities to invest in storage. Recently, French energy developer, EDF, signed a contract with Italian power generation company Nidec ASI for the creation of a 49 MW energy storage system (ESS) in Nottinghamshire, UK. The project is part of a 200 MW enhanced frequency response (EFR) system introduced by the UK’s National Grid and is expected to become Europe’s biggest battery storage project.

With such developments in energy storage and falling prices for lithium-ion batteries, the opportunities for investment in European storage projects are increasing. European policy-makers could support the development of storage on European soil by establishing a regulatory framework that creates incentives for storage investments and ensuring that all investors (including DSOs and TSOs) may participate (see Hot Topic of 01 December 2016: ‘The EC’s Energy Winter Package: Is storage being neglected?’). The European Commission missed this opportunity with its recently released Winter Package but the EP and the Council now have the opportunity to make things right.


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