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Tesla Motors Enters The Battery Storage Business


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Tesla Motors Changes The Energy Markets Forever

May 1, 2015 will go down in history as the day when Tesla Motors entered the battery storage business for home and business applications. It will be a day that marks a major shift in the energy markets, which will have a dramatic and far-reaching effects on many people for years to come.

Tesla’s entry into the battery storage business could be a major game changer for both the company and the widespread adoption of renewable energy in the United States and throughout the world. This would not be an Earth-shattering development if it was not made by the highly motivated Tesla founder, Elon Musk. He is not known to pontificate about unrealistic business plans. When Elon Musk sets his mind to something, such as bringing affordable electricity battery storage to the masses, it is highly likely to happen.

Tesla Motors Enters The Battery Storage Business

GigafactoryTesla’s entry into the battery storage business is not only a likely game changer for renewable energy, but it may also provide a big boost to Tesla Motors’ stock (NASDAQ:   TSLA). Many analysts were scratching their heads when Elon Musk announced that Tesla would build a massive lithium-ion battery factory in the United States, which has come to be known as the “Gigafactory”. The multi-billion dollar investment in the huge battery producing factory in the Nevada desert was thought of as an enormous expense for an electric car company to take on just to obtain less expensive batteries for their electric vehicles.

In hindsight, it is now obvious that Elon Musk had other ideas on this mind, beyond simply producing batteries for the highly sought after Tesla electric vehicles. With the recent announcement that Tesla is entering the battery storage business, the investment in a massive battery producing facility makes a lot more sense. Musk is positioning Tesla to be the dominant player in the world of on-site electricity storage that is unfolding as distributed renewable sources of electricity, such as solar and wind power, are becoming more competitive versus grid provided sources of electricity.

What Is The Big Deal About Tesla Motors Entering The Battery Storage Business

Tesla Home BatterySo, what is the big deal about Tesla entering into the battery storage business? This development has big impacts for Tesla’s stock TSLA. The stock trades at a lofty level that gives the company a rich market capitalization of approximately $29 billion. This valuation is hard to justify if Tesla is simply trying to take on long-established car companies and take a slice of the automobile market. But now, with its entry into the battery storage business, Tesla’s potential revenue and earnings picture has grown much larger. The amount of revenue and earnings that could be generated in the emerging battery storage business, in which there are no dominant players, could be very significant and could justify Tesla ’s high valuation.

Let’s take a look at the projected numbers for the battery storage business to gain a grasp of just how big this business sector is going to be and the positive impact it could have on Tesla’s earnings and stock price going forward. A company called GTM Research studied the emerging battery storage business in conjunction with the Energy Storage Association. They found that the battery storage business was rather small in 2014, with approximately $128 million in sales. However, sales were found to be growing at 40 percent year, with the current sales growth rate expected to accelerate in coming years, as an explosion in renewable energy installations is expected.

Based on current trends, they project that the battery storage business will be generating over $1.5 billion in sales by 2019. No small chunk of change. What really makes it appealing for Tesla is the fact that there is not yet a company that dominates this business sector, so they have plenty of room to grow. It appears that Elon Musk intends for Tesla to be the dominant company in this fast growing business segment, offering both residential and more expensive commercial battery storage systems.   Tesla has the advantage of having their huge gigafactory coming online over the next few years and their close relationship with another of Elon Musk’s companies, Solar City, which will provide a customer base to sell their battery storage systems to.

Beyond 2019, sales in the battery storage business could grow to the tens of billions of dollars each year. At the same time as Tesla is refining its battery storage products and ramping up production, the cost and installation base for renewable energy is expected to explode.   By 2020, wind and solar energy will be cheaper than grid electricity in many parts of the United States and in some parts of the world. This all adds up to potentially huge revenues for Tesla going forward, which should boost the company’s earnings and stock price.

What Tesla Motors Entering The Battery Storage Business Means For You

What does this all mean for an average consumer of energy in the United States and by extension throughout the world? It means that Elon Musk and Tesla may be spearheading a new era in energy. Long the dream of environmentalists and others that wanted to move on from fossil fuels, it appears that a shift to a fossil fuel free energy model may be possible in the not too distant future.   Not just for one’s personal vehicle, but for their home as well.

Here’s how it will work.   If you have solar power system installed on your roof or a wind powered generator on your property, you could use Tesla’s residential battery storage device to store the electricity that you generate. You could then light and heat your house with the electricity at any time of the day or night, using the stored power. If you own an all-electric Tesla car or sports utility vehicle, you could power it using energy produced and stored at your home. It is not hard to imagine how big this could be for Tesla and what a dramatic change it could mean for the world.

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