How soon will batteries kill fossil fuels?

With renewable energy generation on the rise, the end of the Oil Age is, if not imminent, at least imaginable. However, the most exciting technology these days is arguably not solar or wind power, but the battery storage that makes these and other forms of renewable energy more practical, and also enables electric vehicles. Unlike high-performance electric supercars, the burgeoning battery business seldom makes headlines, but all kinds of exciting news is out there for those who take an interest.

Above: Tesla Powerpacks (Image: Tesla)

Bloomberg reports that the US Federal Energy Regulatory Commission recently ruled that energy storage companies such as Tesla can compete with traditional power plants in wholesale energy markets by the end of 2020. While the average consumer may not see the significance, Joel Eisen, an energy law professor at the University of Richmond, called it “a watershed event,” and compared it to the deregulation of the telecommunications market in the 1970s, which enabled the internet by giving computers access to phone lines.

The Brattle Group estimates that the energy commission’s ruling could unleash as much as 50 gigawatts of battery-stored power into US markets, enough to power 6 million homes.

The burgeoning battery business is not going unnoticed by incumbents in the energy industries. At the recent CERAWeek conference in Houston, an annual gathering of players in the oil and gas fields, executives met to talk batteries in a couple of packed sessions. “The question is no longer if batteries will disrupt the power sector,” conference organizer IHS wrote, “but rather how much and how fast?”

Above: The growth of stationary battery storage is projected to grow worldwide (Source: Bloomberg)

Oil companies and electric utilities are bracing for a one-two punch from battery-powered cars and a battery-enabled smart grid. BP sees oil demand peaking in the 2030s as EVs hit the road in droves. The CEO of oil giant Total said at CERAWeek that he’s already driving an electric car.

On the electrical grid, natural gas is steadily displacing coal as the fossil fuel of choice, but gas, which currently generates about a third of US electricity, is now itself being challenged as batteries barge into power markets. In California and Arizona, utilities including PG&E and Pinnacle West are abandoning gas plants in favor of renewable energy projects, thanks to battery systems that allow them to store their power and release it as needed. “Batteries are like bacon,” said Southern California Edison executive Vibhu Kaushik. “They just make everything better.”

One of the most visible producers of that yummy bacon is Tesla - its 100-megawatt battery farm in South Australia is only the most famous of the many projects it has in place or planned. A pilot project in Nova Scotia will use Tesla’s utility-grade Powerpack batteries in conjunction with local wind turbines to provide backup power for 300 homes, Marketwatch reports. Electrek tells us that Tesla is bidding on a giant battery system in Colorado for Xcel Energy, which would take the title for the world’s largest (in terms of energy capacity) away from Tesla’s Australian installation.

Above: A look at Tesla's massive battery installation in South Australia (Youtube: Tesla)

Tesla’s energy storage and generation revenue increased from $181 million in 2016 to $1.1 billion in 2017, but the company says the party is just getting started. According to Tesla’s fourth-quarter shareholder letter, 2018 will see a huge increase in its energy storage business (as reported by the Motley Fool).

“2018 will see major growth in Tesla energy storage deployments, as the production ramp of our storage products is just as steep as with Model 3,” said Tesla. “This year, we aim to deploy at least three times the storage capacity we deployed in 2017.” Tesla deployed 358 megawatt-hours of energy storage products in 2017, and hopes to deliver 1,074 megawatt-hours in 2018.

Unsurprisingly, the high-visibility South Australia project has generated a lot of interest from large customers. “Due to the success of this project, we’re seeing an increase in demand for Powerpack, our commercial energy storage product,” says Tesla. “With more electric utilities and governments around the world recognizing the reliability, environmental, and economic benefits of this product, it’s clear that there is a huge opportunity for us in large-scale energy storage.

Above: Tesla CEO Elon Musk on-site at the biggest battery in the world in South Australia (Instagram: elonmusk)

But the Fool notes that investors shouldn’t overlook Tesla’s plans for residential energy storage. Demand for Tesla’s residential energy storage solution, Powerwall, also “remains exceptionally high, with orders consistently above production levels,” the company says. As Tesla continues to roll out its energy products at more of its retail stores, the battery boom should only continue.


Written by: Charles Morris