Tesla Powerblock and the Gigafactory

If Tesla BEVs and Powerwalls can’t use all the batteries being built in the gigafactory, can Tesla’s Powerblock save the day?

The factory was built to supply 500,000 Tesla vehicles yearly, but it’s very unlikely Tesla will reach sales of that magnitude in 2020.

The Powerwall product is virtually useless for homeowner PV rooftop installations, so only a few will be sold. The Powerwall isn’t going to use very much of the gigafactory’s capacity.

Whether the gigafactory is an economic success is likely to depend on the Powerblock using large numbers of batteries.

To start this quick analysis, let’s establish the capacity of the gigafactory after accounting for Tesla BEV sales in 2020, the year the gigafactory is to be in full operation.

Tesla’s BEV sales are elusive, but total sales in 2014 were approximately 18,000 vehicles.

Sales have been sluggish so far this year. Assuming a 30% growth rate between 2014 and 2020, sales in 2020 would be approximately 100,000 vehicles.

With sales of 100,000 BEVs in 2020, the gigafactory would have a remaining capacity for 400,000 additional BEVs.

Assuming the average battery size per vehicle is 70 kWh the remaining gigafactory capacity for batteries would therefore be 28,000,000 kWh, or 28 GWh(1).

The Powerwall will probably not be a large user of batteries, so total excess capacity is arbitrarily reduced to 27 GWh, which generously assumes 150,000 Powerwall units sold in 2020.

The excess capacity is available for usage in the Powerblock whose market is commercial and utility storage.

The Powerblock provides storage for the following commercial and utility applications.

  1. When time of day pricing is in place, which it is in California, commercial customers have an incentive to buy electricity from the grid during off-peak hours and store it for use later in the day, and avoid using expensive electricity during peak hours. For example, they may be able to buy electricity for 10 cents per kWh, and avoid having to pay 35 cents per kWh during peak periods.
  2. Utilities would use storage in combination with solar and wind to store electricity during the day for use in the evening to level out the load and help mitigate rapid ramping of fossil fuel power plants. See, The Duck Speaks.

California is the driving force behind storage requirements, so its market is the first to be served.

California has mandated that 1,350 MW of storage be provided, 50% by utilities and 50% by commercial or other applications, by 2020. This would seem to indicate the gigafactory will be late to the game, but the 2020 mandate is merely the tip of the iceberg if renewable mandates of 33% and 50% are to be met.

The storage mandate specifies MW, not MWh, so it’s not entirely clear how to compare gigafactory capacity in GWh with the MW mandate. Furthermore, it’s been impossible to ascertain with any degree of certainty the amount of storage required in California in MWh.

Tehachapi Storage Project Using 604,832 Li-ion cells. Photo by Southern California Edison.
Tehachapi Storage Project Using 604,832 Li-ion cells. Photo by Southern California Edison.

Two actual examples may provide some guidance as to whether the capacity of the gigafactory can be fully utilized every year.

The first example is Cargill that used one MW of storage to save $100,000 annually. Assuming $25,000 per unit for the Powerblock, total Cargill investment is estimated to have been $350,000. The payback of 3+ years is good.

The second example is the Tehachapi storage project by Southern California Edison (SCE) to accommodate wind energy. This installation was rated at 32,000 kWh. Based on available excess gigafactory capacity, Powerblock batteries could be provided for approximately 900 similar installations. The batteries for the Tehachapi project were supplied by LG Chem, a competitor of Tesla’s.

Another problem with making any assumptions about whether the Tesla gigafactory will be fully utilized is that there is competition from other battery suppliers.

The other batteries may be lower in cost or be able to provide storage without degrading the batteries. The Tesla Powerblock, for example, is rated at 5,000 cycles, which would indicate, under normal usage, the battery would have to be replaced after 15 years.

Meanwhile, flow batteries could last indefinitely.

The EosAurora battery cost is forecast to be $160/kWh compared with the Powerblock’s $250/kWh.

If sales of Tesla BEVs is greater than 100,000 units in 2020, it will, of course, reduce the factory’s dependence on storage applications.

The most that can be said at the moment is that Tesla’s success depends on four variables.

  • BEV sales
  • Battery sales to other automobile manufacturers
  • Powerwall sales
  • Powerblock sales

Given current trends in BEV sales and the likelihood of limited Powerwall sales, the future success of the gigafactory would seem to depend on Powerblock sales.

Arriving at a forecast for Powerblock sales will depend on determining the amount of total storage required in MWh for California and the other states using large quantities of renewables.

 

Article Note:
1: The specifications for the gigafactory call for 35 GWh of cell capacity, but at the same time 50 GWh of pack capacity. It’s not clear why these seemingly contradictory specifications are given, so the article proceeds on the basis of 35 GWh capacity.

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0 Replies to “Tesla Powerblock and the Gigafactory”

    • Craig:
      I can’t make stock picks. I’m not a qualified analyst. Personally, I wouldn’t have bought it to begin with, but from a stock pickers point of view that would have been a mistake. All I can do is provide as much factual information as possible, so that other people, after doing their own research, can decide what to do.
      Tesla is especially hard to predict, because it has a cult following and so much emotion is involved. Facts are not as important under these circumstances.

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  2. Tesla alone sold 33,000 BEVs in 2014, and projects 55,000 in 2015, ramping 50%/yr. for the forseeable future. Leaf sales globally were about 60,000 last year.

    Your numbers are about 20% of just those two combined. Incompetent reporting.

    • Brian:
      Total BEV sales of all makes were 63,416 in 2014. Nowhere did I see any reports showing that Tesla had over half of BEV sales. As for 2015, that’s just speculation. Maybe it will happen, but total BEV sale from all manufacturers in the first quarter of 2015 were only 14,127. Annualized, that would mean Tesla will have nearly 100% of BEV sales. Not likely.
      It’s not realistic to annualize first quarter numbers, but I did here just to demonstrate that Tesla probably won’t achieve anywhere near the sales you say.
      You may need to double check your numbers, and use actual, not estimates, when evaluating sales.

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