Back when Tesla Inc. (Nasdaq: TSLA) unveiled a test of its new "Powerpacks" - batteries to power homes and businesses - it was clear that the company's future wasn't in building cars...
But in providing for a broad spectrum of power sources.
Most people still regard lithium-ion batteries as something just to do with cellphones or electric cars.
But now a major announcement by Tesla indicates the shift to serving large-scale power needs is happening sooner than expected.
This could be an absolute game changer in energy storage...
And could revolutionize energy worldwide.
In Less Than 100 Days, Tesla Will Open the Largest Ever Battery Project
In less than 100 days, the mother of all lithium-ion batteries will be operating in South Australia... charged by renewable energy.
The 129 megawatt hour (MWh) project comprises the world's largest lithium-ion energy storage system ever - more than 60% larger than an 80 MWh facility at Mira Loma in Ontario, Calif.
The project combines a huge system designed by Tesla with a nearby 99 turbine wind farm operated by French renewable energy company Neoen. And the prospect may be the most important advance in electricity production in decades.
To add some spice to the announcement, Tesla founder and CEO Elon Musk pledged that he would provide the project for free if the 100-day commitment could not be met.
That means the massive series of battery packs and inverters - the battery actually encompasses two subsystems, each having 198 Tesla "Powerpacks" and 24 inverters - is supposed to be online by the beginning of December.
And the location in South Australia is no accident...
Tesla's Batteries Will Help Prevent Blackouts
South Australia has been plagued by increasing blackouts. Last year the problem accelerated with residences in some areas left without power for weeks.
The Tesla battery will not completely solve the problem (it's designed to provide electricity for about 30,000 homes). But an initial success will allow for a rapid expansion of applications.
Now, neither Tesla nor the South Australian state government will directly comment on what the system costs.
However, anecdotal industry information puts it at between AU$200 million to AU$400 million ($155 million to $310 million). For his part, Musk has estimated the cost to be "around" $42 million, while Tesla's battery division head Lyndon Rive had initially put the price tag at about $51 million.
Any of these makes the battery project doable, especially when there are government players interested and worsening power distribution problems.
Without providing any details, South Australia's Premier Jay Weatherill added on Saturday, July 8, that the entire project would fall "well within" the amount budgeted for renewable energy.
Each Powerpack charges using the renewable energy provided by Neoen, and then distributes electricity during the peak demand period. This allows a better operation of the South Australian grid.
What is even more important from the state's perspective is the ability of the system to inject emergency backup power in the event of a blackout or rolling brownout.
The Mira Loma facility in California has already provided a proof of concept that this works...
This Is the "Holy Grail" of Energy Storage
Using Tesla Powerpacks and operated by Southern California Edison, it has been operating flawlessly since being put on line last December. That one is charged by both solar and wind power.
The 80 MWh station is intended to save power generated from renewable sources as well as provide backup against blackouts.
The next two stages in this fascinating development are just as exciting.
First, expanding usage of these huge batteries does not require a physical expansion of existing infrastructure. It is more efficient to place standalone stations or substations near power sources and communities being serviced.
While there is a clear advantage to having the leverage of placing additional electricity onto the grid as needed, the requirement does not mean that the traditional economy-of-scale approach is used.
Serializing stations in a spread-out network with access to the grid, rather than serializing the equipment in a single location, improves performance.
Second is the "Holy Grail" in all of this. Five or six years ago I began addressing another matter upon which this Tesla project now focuses...
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Tesla Is Making a Technological Leap Forward
I'm talking about what we in the business call "inversion."
The inverters contained within the lithium-ion battery array address the single most negative aspect of generating electricity, from wind or solar, for transport.
Wind and solar harvest energy in direct current (DC), but electricity is transported over power lines using alternating current (AC). The switch from one to the other is called "inversion," and it can waste a third or more of the electricity produced.
Tesla is now working on reducing that amount by integrating their inverters with the rest of the system. Retaining just a fraction of the electricity that would otherwise be lost through inversion will have a major impact on the bottom line.
In fact, solar and wind already have grid parity, i.e., they generate power at the same cost as more traditional sources, in many places globally (including South Australia).
And now, the combination of lithium-ion batteries with improved inversion technology will make them even more cost-effective - and be an absolute game changer.
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About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.