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Wednesday, January 11, 2017

The tiger is out of its cage




Tesla has announced that battery cell production has begun at its gigafactory in Nevada.  Well, one in the eye for the Tesla haters, but not really earth-shattering news.  Except for this:

With the Gigafactory online and ramping up production, our cost of battery cells will significantly decline due to increasing automation and process design to enhance yield, lowered capital investment per Wh of production, the simple optimization of locating most manufacturing processes under one roof, and economies of scale. By bringing down the cost of batteries, we can make our products available to more and more people, allowing us to make the biggest possible impact on transitioning the world to sustainable energy.


[My underlining.  Read the original new release here]

Now Tesla has already reduced the cost of batteries by nearly 50% in one year.  And that's before it started producing its own batteries.  So what does a significant decline mean?  30%?  50%?  Whichever percentage, it's massive.   Up until a couple of years ago, lithium-ion battery costs fell by 15% per annum, which seemed really fast then!

Storage has been the missing link in the roll out of renewables.  For storing solar from the 9 am to 3 pm insolation peak for evening demand, or for smoothing out the random cyclical variability of wind supply, storage is essential if we are to go to 100% renewables in electricity generation, and of course it's essential for electrifying transport.   I've talked about CSP here and here.   That's a good option for utility level solar plus storage.

But for households, small businesses, and small town "micro-grids", rooftop solar PV plus batteries increasingly seems like a marriage made in heaven, and the attraction only gets hotter as battery costs fall.  I predict it will be the norm for households with solar to also have one Tesla Powerwall, which won't quite store enough for a day's usage, here in Australia, anyway, but will take us a long way towards it.  As long as the electricity suppliers pay half of nothing for the solar-generated electricity we put back into the grid, behind-the-meter batteries are going to be attractive.  That's in most countries outside the US, and especially Australia, where feed-in tariffs are sometimes zero, while electricity bought from the grid costs 25 cents per KWh.

The fall in battery costs means that the cost of an electric car will also cross that magical line where they have the same sticker price as petrol-driven cars.  They are already cheaper to run, because electric cars are more efficient, require far less maintenance, and depreciate slower.  They're far more fun to drive, much quieter and smoother, and produce no direct pollution.  If their sticker price is the same as a petrol (gasoline) car, then the only remaining negatives will be charging time and the absence of charging stations.  But those are mostly relevant only for long journeys, once you have more than 160 kms (100 miles) of range, as most ppl commute less than 100 k's (60 miles) per day, and so will only need to charge their cars at home overnight.

So if battery costs halve again over, say, the next 18 months, we are going to see an explosive growth in EV sales.  And as EV sales take off, the supercharging network will grow, and at some point petrol service stations will either close down or convert to EV charging stations offering you tea, coffee and a snack while your EV charges.  There will come a point where petrol-driven cars are less convenient than electric cars, where range anxiety will be something only owners of petrol cars experience,

Alternatively, those with electric range anxiety will buy a plug-in hybrid.  But my guess is that there will only be a brief period (5 years?) when they're financially worth it, because essentially hybrids have two engines and two energy storage devices, with all the disadvantages and expense of petrol vehicles.  Once there are superchargers everywhere, why bother about a petrol backup?

Tesla is inexorably and irreversibly shifting the energy landscape.  Thanks to them, we will all ultimately be able to live with cheap, reliable carbon-free energy.  And that shift is happening far faster than we thought, even just a year ago, let alone 5 years ago.  Trump and his dotty climate-denying, oil-loving buddies won't be able to stop it.  Actually, I don't think, after this latest news, they'll even be able to slow it.  The tiger is out of its cage.


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