At a sagebrush-strewn industrial park outside of Reno, Nevada, bulldozers are clearing dirt for Tesla Motors' battery factory, projected to be the world's largest.
Tesla's founder, Elon Musk, sees the $5-billion facility as a key step toward making electric cars more affordable, while ending reliance on oil and reducing greenhouse gas emissions. At first blush, the push toward more electric cars looks to be positive for utilities struggling with stagnant sales from energy conservation and slow economic growth.
Yet Musk's so-called gigafactory may soon become an existential threat to the 100-year-old utility business model. The facility will also churn out stationary battery packs that can be paired with rooftop solar panels to store power. Already, a second company led by Musk, SolarCity, is packaging solar panels and batteries to power California homes and companies including Walmart Stores.
"The mortal threat that ever cheaper on-site renewables pose" comes from systems that include storage, said Amory Lovins, co-founder of the Rocky Mountain Institute, a Snowmass, Colorado-based energy consultant. "That is an unregulated product you can buy at Home Depot that leaves the old business model with no place to hide."
The Tesla systems are arriving just as utilities begin to feel increasing pressure worldwide from the disruption posed by renewable energy.
Lima meeting
In Germany, the rapid rise of tax-subsidised clean energy has undermined wholesale prices and decimated the profitability of coal and natural gas plants. Germany's largest utility EON SE said this week it will spin off its fossil-fuel plant business to focus on renewables in part because of new clean energy competitors coming onto its turf.
Threats to the traditional utility model come as energy and environment take the world stage at the latest round of United Nations climate talks that began December 1 in Lima. Delegates, backed by global environmental groups, want to leave the conference with a draft agreement to tackle climate change by lowering carbon-dioxide emissions - something that has eluded them for years.
The Rocky Mountain Institute's Lovins has installed solar on his house in Snowmass and uses it to power his electric car. His monthly electric bill: $25. He has a lot of company.
100,000 plug-ins
In California, where 40 per cent of the nation's plug-in cars have been sold, about half of electric vehicle owners have solar or want to install it, according to a February survey by the Center for Sustainable Energy, a green-energy advocate. More than 100,000 plug-ins have been sold in California, according to data from HybridCars.com and Baum & Associates, though EVs make up less than one per cent of all US car sales.
Few homes and businesses use solar and back-up-battery storage, proof for some utilities that the systems remain a hard sell outside of states like California or markets like Hawaii where high power costs make solar competitive.
Still, the Edison Electric Institute, a trade group representing America's investor-owned utilities, recently announced that its members will help to encourage electric vehicle use by spending $50 million annually to buy plug-in service trucks and invest in car-charging technology.
"Advancing plug-in electric vehicles and technologies is an industry priority," said EEI President Thomas Kuhn.
Charging stations
Analysts think the industry has been slow to react. Tesla, SolarCity and green-energy companies are already moving aggressively into unoccupied space. "Some of the more nimble companies that think and move more quickly, they are beating the utilities to the punch," said Ben Kallo, a San Francisco-based analyst for Robert W Baird & Co.
Tesla has installed 135 fast-charging stations, some powered by solar, across North America where its Model S drivers can refuel for free. NRG Energy is building a network of public charging stations in major cities that drivers can access on a per-charge basis or for a flat monthly fee of about $15.
And then there's the home front. In a July report, Morgan Stanley said Tesla's home and business energy-storage product could be "disruptive" in the US and in Europe as customers seek to avoid utility fees by going "off-grid."
'Sufficient appreciation'
"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,'" Morgan Stanley analysts wrote.
Tesla sees itself taking on a grand mission - not just to lower emissions from cars and trucks, but to have a societal impact. "If we only do it on the transportation side, we ignore the utility side, and we are probably ignoring half of our responsibility," said Mateo Jaramillo, director of powertrain business development at Tesla Motors, at the recent Platts California Power and Gas Conference in San Francisco.
Tesla and Oncor Electric Delivery, owner of the largest power-line network in Texas, have discussed a $2-billion investment in stationary battery storage to solve the problem of fluctuating output from wind and solar. Tesla and SolarCity are separate entities and only share management at the board level.
Smart home
A glimpse of that future can be seen in Davis, California, where Honda Motor has developed a "smart home" that produces more energy than it uses while charging a plug-in car. The home was designed in collaboration with SolarCity, PG&E Corp and the University of California at Davis to showcase energy-efficient and renewable technologies. It will serve as a home for a member of the UC Davis community and a lab for the study of new businesses and technologies.
SolarCity rival SunPower is offering its solar and storage systems to buyers of electric cars from Audi AG and rebates for solar-panels to Ford Motor plug-in customers. SunPower also has struck a partnership with homebuilder KB Home to begin installing solar and storage systems in California.
The time when residents can charge their electric cars with excess solar stored in their home batteries is "not decades away, that is years away," said SunPower CEO Tom Werner.
mchediak@bloomberg.net
© Bloomberg
© Bloomberg