Is Tesla becoming a threat to the world’s biggest utilities?

Posted on September 29, 2021 by Charles Morris

The electric utility industry is on the verge of a revolution. The traditional utility model, in which energy is generated by a small number of enormous central power plants, is already as outdated as cars that burn fossil fuels. The electrical grid is gradually becoming a more complex, decentralized web of small generating plants—many of them using renewable energy—and stationary storage facilities, collectively known as distributed (or dispatchable) energy resources (DERs). 

Above: Tesla's solar and battery storage play may soon become a threat to traditional fossil fuel powered utilities (Image: Tesla)

Tesla is at the forefront of this trend. It sells not only solar panels, but also battery storage systems for residential (Powerwall), commercial (Powerpack) and utility-scale (Megapack) applications. Another piece of the puzzle is Autobidder, a software product that provides “a real-time trading and control platform” to enable independent power producers to make battery assets available to the grid as DERs.

Recently, the company has been taking steps to put this all together, and become “a giant distributed utility.” Last November, Tesla partnered with Octopus Energy to become a retail energy provider in the UK. In August, the company applied to the Texas Public Utility Commission to enter the state’s electricity market as an official retailer.

Now IEEE Spectrum reports that Tesla, together with Octopus Energy Germany, is offering retail utility services in two large German states. The Tesla Energy Plan is available to households that have solar panels and a Tesla Powerwall. It’s currently offered in the German states of Baden-Württemberg and Bavaria, and according to Handelsblatt, it’s scheduled to be rolled out to the whole country by the beginning of 2022.

Tesla began laying the groundwork for this new business venture last year—it became a member of the Paris-based EPEX Spot power exchange, a platform used to trade cross-border electricity in western Europe, and surveyed German customers about their interest in using Tesla-branded electrons to power their cars (and houses).

Above: Earlier this year, Billionaire investor Chamath Palihapitiya called Tesla 'a distributed energy business' (YouTube: CNBC Television)

It appears that the California disruption machine intends to take on not only the powerful German auto brands, but the country’s major electric utilities as well. By aggregating the solar generating capacity and the storage capacity of Tesla Energy Plan households, Tesla can create a virtual power plant, which it can market as a DER using its Autobidder software. The company has the real estate to create even more generation and storage assets—solar panels are likely to start appearing on the roof of the Berlin Gigafactory, and on carports at Supercharger sites. And what will these sites use for storage? Why, Tesla Powerpacks, of course. It’s surely no coincidence that Tesla’s retail utility offering is appearing first in Germany and Texas, the sites of the next two Gigafactories.

Tesla is just one player in a rapidly-changing utility industry, but its well-known brand has attracted an unprecedented amount of attention to a complex network that most of us never think about, as long as the lights stay on.

“Over the last 5 to 10 years we have seen an uptick in new entrants providing retail energy services,” Albert Cheung, Head of Global Analysis at BloombergNEF, tells IEEE Spectrum. “It is now quite common to see these types of companies gain significant market share without necessarily owning any of their own generation or network assets at all.”

“There are going to be more and different business models out there,” Cheung says. “There is going to be value in distributed energy resources at the customer’s home, whether that is a battery, an electric vehicle charger, a heat pump or other forms of flexible load, and managing these in a way that provides value to the grid will create revenue opportunities.”

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Written by: Charles Morris; Source: IEEE Spectrum

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