Cleantech Market Intelligence
Tesla Tries Out Battery Swapping
Fresh on the heels of the demise of Better Place, Tesla Motors says it will begin offering battery swapping as an option alongside its Supercharger network. That’s a somewhat surprising decision, as Better Place’s play in battery swapping burned through $800 million with little to show for it, a fact that should be alarming to Tesla’s investors. Despite the fact that this appears to be a questionable idea, there could be opportunities.
Tesla plans to install battery swap stations at its pre-existing Supercharger network locations, which includes eight stations: six in California and two on the East Coast. When Model S owners pull into a Supercharger station, they’ll choose between charging their battery from a Supercharger for free (which may take as much as 30 minutes), or swapping their battery for a service fee (which can take as little as 90 seconds). The service fee is equivalent to 15 gallons of gas at local rates; currently about $60 to $80.
Ideally, the Model S owner will return to the station and retrieve the original battery pack when finished with the replacement pack, once again paying the service fee. The owner may choose not to go to the station and have the older pack delivered to them for a fee, or choose to simply keep the replacement pack and Tesla will submit a bill for the value difference of the battery pack based on its age. Each station will have around 50 battery packs on hand (3 to 4.25 MWh of energy). The first battery swap stations should come online by the end of 2013.
Solar + Swaps
The Supercharger network has never seemed like a sound business model, as Tesla offers extremely high power charging for free. According to Tesla, the solar installations paired with the Supercharger stations reduce marginal energy costs to near-zero after the installation; therefore, the company can afford to offer charging for free. That’s hard to credit, unless the stations and solar panels are paired with an energy storage device, like a battery. In that case the excess energy provided by the battery packs could present additional revenue streams through participation in electricity ancillary service markets.
As with Better Place, the major challenge is to recoup the capital cost of the stations. Tesla estimates the cost per battery swap station to be around $500,000. Better Place wound up paying a similar fortune for each station, and acquired only a smattering of subscription members (the one vehicle compatible with the system was the Renault Fluence Z.E., which is not exactly a top-selling model). The Model S, on the other hand, is to date this year’s best-selling EV in the United States. Still, battery swaps are costly, and given that the company is already offering free charging at the same location, Model S owners may be content to wait 15 to 30 minutes instead of utilizing the battery swap stations.
In the worst case scenario, Tesla’s bet on battery swapping will cost the company but won’t bankrupt it. Tesla is dipping a toe into battery swapping; the company has not declared whether future models will be battery swap compatible. In the best case scenario Tesla makes a marginal profit paying back the costs of the stations from enthusiastic Model S owner participation. Few who were on the fence about the Model S will buy it solely because battery swapping is now a possibility. Battery swapping, though, could lead Tesla to other alternative recharging models, such as battery leasing – which would significantly cut the initial purchase price of the Model S and possibly spike orders.