Tesla’s Future Success

Batteries are really what Tesla is all about — not the media-loving, mass market Model 3, not Roadsters, not falcon-wing doors, and certainly not the hyperloop. Batteries are the keys to completing a worldwide transition to a clean energy economy, and Tesla, with all its entrés to date into increased battery storage capacity, will really have to step up its game to dominate the market share as CEO Elon Musk has publicly envisioned.

During Tesla’s recent Q4 2017 conference call, following the release of the February 7th shareholder letter, CEO Elon Musk said that the company “put a lot of attention on other things and just got too comfortable with our ability to do battery modules because we’ve been doing that since the start of the company.” Overlooking the importance of batteries is a significant strategic error, and one which Tesla needs to quickly and efficiently remedy.

A Tesla Battery Primer

An individual cell is the fundamental building block of a battery, and each is fewer than 3 inches long and smaller than 1 inch in diameter. As the battery charges, positively charged lithium ions move from the cathode to the anode through an electrolyte solution in the battery cell. The electrons gather on the anode, at the negative side, and the reverse takes place when the battery is discharged. The electrons move through external circuits that can provide power to thousands of homes, businesses, or electric vehicles.

Tesla’s enormous battery factory — about 5.5 million square feet — in Nevada, called the Gigafactory or Gigafactory 1, is key to Tesla’s future. Once at full capacity, Tesla reportedly expects the Gigafactory to introduce production cost cuts for lithium-ion electric vehicle batteries and energy storage products by some 30%, compared to pre-Gigafactory batteries. Such production savings will occur once the Gigafactory is fully operational in 2018 by “using economies of scale, innovative manufacturing, reduction of waste, and the simple optimization of locating most manufacturing process under one roof.”

The degree to which the general public embraces all-electric transportation is contingent upon those batteries: how much energy storage a vehicle possesses — as well as whether the vehicle/ fleet owner can generate enough energy in a private storage system. That returns us to the battery dilemma.

Why are Batteries Integral to Clean, Renewable Energy?

Tesla’s home battery integrates with solar to harness the abundant power of sunshine falling on rooftops and reduce reliance on fossil fuels. Renewable energy sources like the wind and the sun often have excess energy that, unless stored, can “go to waste.” Batteries are the most common type of energy storage and can collect and store excess electricity for those times when clouds, calm days, or the night sky interrupt renewable energy generation.

Batteries may also slowly change the dynamic among energy utilities, homeowners, and businesses as batteries at residences, offices, and other commercial buildings allow customers to save electricity collected by their solar panels to use at times when electricity prices are highest.

Let’s look at the Tesla/ South Australia energy partnership as a microcosm of what Tesla would like one day to accomplish on a global scale. South Australia has the world’s biggest battery installation, made up of network of batteries housed in Tesla-made units called Powerpacks. Each Tesla Powerpack has 16 layers of batteries inside, and those battery pods contain cells.

These battery cells (2170 cells), produced in Tesla’s Nevada Gigafactory, are used in utility-scale usage, homes, and the Model 3. The South Australia Tesla Powerpacks charge using renewable energy from the Hornsdale Wind Farm. They serve as an electricity reservoir for times when power demand peaks, a large fossil power plant goes down, or the wind isn’t blowing.

Battery Experts Turn Tail on Tesla

Let’s pose one final question about Tesla policies and battery production. What might the effect of the recent exodus of battery tech leaders like Celina Mikolajcza and Ernest Villanueva have on Tesla?

Mikolajczak served as Tesla’s senior manager and technical lead for battery technology, cell quality, and materials analysis. Liaison to Tesla’s suppliers, Mikolajczak tested the car company’s lithium-ion batteries for long-term use, oversaw quality assurance, and conducted failure analysis to drive battery cell production and design improvements.

Villanueva, who holds numerous patents, was integral to the design process of battery modules that power Tesla’s vehicles. With a Tesla resume that stretches back to 2006, Villanueva has watched Tesla grow from an idea to an all-electric vehicle and renewable energy storage company.

My, that seems a long time ago. Remember Elon Musk’s announcement back in 2006? It was that Tesla’s “long term plan is to build a wide range of models, including affordably priced family cars … to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy.”

What part must battery production play in order for that movement away from a “mine-and-burn hydrocarbon economy” to come about across the globe? How much will the battery market grow in the next few years? Will lithium-ion batteries continue to be the primary method of storing electricity? Will the cost of lithium-ion batteries continue to fall and assure the market’s continued growth? Assuming the answers are all strong, it seems that Tesla’s best move would be to put all of the effort it can into leading on batteries and not getting complacent with what it has achieved so far.