Navigant Research Blog

Unknowns Narrow for Tesla’s Gigafactory

— July 31, 2014

Tesla Motors announced today that it has started civil engineering work at a site in Nevada for the eventual construction of its Gigafactory – a battery-manufacturing plant that will produce 50 GWh of batteries a year.  Broadcast in a shareholder letter that accompanied Tesla’s quarterly earnings results, the announcement confirmed some rumors but was still extremely short on specifics.   A lot of uncertainties remain about how, where, and by when the Gigafactory will be built.

The first issue is site location.  Tesla has said in the past that it will build the factory in one of five states: California, Nevada, Arizona, New Mexico, or Texas.  It has also said that it will begin development work on more than one site, choosing the eventual location from multiple contenders upon which initial civil engineering work has already been done.  Now we know that the Nevada site outside of Reno is one of those finalists.  Where is/are the other/s?  No word from Tesla on that, but it is pretty easy to identify the five top contenders.  That’s because the Gigafactory will need to be on a main rail line that connects with the company’s Fremont, California automobile factory.  It will also need to be near a large population center in one of those five states.  That leaves the following contenders:

  • Central Valley, California
  • Tucson, Arizona
  • Albuquerque, New Mexico
  • El Paso, Texas
  • Austin/San Antonio, Texas

You can expect the second site to be in one of those areas.  There is still one potential curveball that might come  from Tesla – the possibility that the Gigafactory will be composed of multiple sites: maybe a separator factory in one state, an electrolyte factory in another locale, and a final assembly plant in another.

More to Come

The other piece of interesting information still to be determined is exactly how the Gigafactory will be structured.  No blueprint exists for how to design a factory that is owned by multiple parties: it’s a unique concept that has never been tried before.  One day earlier, Tesla said that Panasonic will definitely be the manufacturing partner for the Gigafactory.  Now the questions are how will the ownership of the site and its equipment be divided, and who will be the other component manufacturing partners? Expect a number of announcements on that end to come out over the next several months.  Among the potential other manufacturing partners that Navigant Research expects to be chosen are a cathode material supplier (such as Nippon Denko or Umicore), a graphite supplier (Northern Graphite, Alabama Graphite), an electrolyte manufacturer (Ube, Sumitomo, or Nichia), and a separator manufacturer (Celgard, Ube, or Toray).  Other materials needed for the batteries, such as lithium carbonate, copper foil, and aluminum casings, will probably be made offsite and delivered by rail.

The final questions are when the Gigafactory will go online and when it will reach full capacity.  Tesla has already said that it hopes that those dates will be 2017 and 2020, respectively, but exactly how the ramp rate works will be interesting to see.  Panasonic has clearly stated that it will invest in the equipment for the factory in a staggered, conservative fashion.  That could lead to a much slower build-up to full capacity than the 3 years that Tesla is claiming.  Regardless of the details of the how, when, and where of the facility, Navigant Research believes strongly that the Gigafactory will be built and will be a successful, potentially revolutionary, manufacturing venture.


Big Savings from Replacing Diesel with Storage

— July 6, 2014

In my previous blog on diesel and energy storage, I discussed the payback period for energy storage in a remote microgrid.  What is the value of reducing diesel usage in a microgrid, practically speaking?

The table below illustrates the first-year savings of displacing 15% of the diesel generation in microgrids of different sizes using energy storage.  The average installed energy storage cost in this model is $2,112 per kW, and the assumption for the minimum cost of diesel fuel is $1.09 per liter, with the maximum cost in the model averaging $3.27 per liter.  Since the installation of storage is a one-time cost that occurs in the first year, the savings go up after that.

Size Distribution of Deployed Microgrids and First-Year Fuel Savings
at Low and High Diesel Costs: 4Q 2013

ESMG table

(Source: Navigant Research)

According to Navigant Research’s Microgrid Deployment Tracker 2Q14, 231 deployed microgrids have diesel generation capacity.  This means that 38% of microgrids have diesel gensets, and overall, gensets account for 11% of microgrid capacity globally.  Only 40% of the 79 microgrids above 10 MW include diesel generators, and smaller systems are less likely to have diesel generation.  Less than one-third of the microgrids below 500 kW rely at least partially on diesel.

Taking the example of a large microgrid system, because this is where the savings are the greatest, microgrids over 10 MW average 42.7 MW of capacity.

Still Too Costly

Assuming a microgrid does in fact have diesel generation, if a 42 MW microgrid replaced 15% of its total capacity (and assuming at least 15% of that capacity would be displacing diesel gensets) with storage, it could save between $10.9 million and $53.4 million per year after storage costs are recouped.  The total savings for all of the large microgrid systems in Navigant Research’s Microgrid Deployment Tracker would amount to $2.2 billion to $10.8 billion per year in diesel fuel using just 200 MW of energy storage.

So why is storage not more popular in remote microgrids?  Chances are it’s because $2,112 per kW installed is still not competitive in most markets where storage is displacing traditional power generation – even with the benefits of volume manufacturing.  Companies such as Samsung SDI and LG Chem are manufacturing lithium ion cells for the grid at great volume, but it’s still challenging to deliver competitive prices to the customer.  This is because a large portion of costs has nothing to do with the core technology, and instead is related to project management, system design and integration, and installation.  As more companies such as Bosch and Schneider Electric enter the market and bring power electronics and energy management expertise to the storage space, these costs will come down significantly, benefiting the entire supply chain. 


Tesla’s Patent Giveaway Paves the EV Freeway

— June 26, 2014

Tesla’s move to open up its patent portfolio is undoubtedly risky, and it could erode Tesla’s competitive advantage.  But the potential rewards outweigh the risks.  The thinking behind Elon Musk’s move is that by allowing the major automakers to use Tesla’s technology, it will help lead to Tesla’s ultimate goal: a comprehensive network of cars, batteries, suppliers, components, and charging stations that utilizes electricity for transportation.  In other words, since Tesla is one of the top electric vehicle (EV) players currently in the market, the company stands to benefit from a vastly expanded network of EV infrastructure based on Tesla’s technology.  The more people that are connected to a network of vehicles relying on electricity, the better it is for Tesla.

Rivals and Collaborators

BMW and Nissan have already expressed interest in collaborating with Tesla on their supercharger technology to potentially create global vehicle charging standards.  BMW has also reportedly considered lending its expertise in carbon fiber technology in exchange for powertrain development and supporting infrastructure.  A partnership between BMW and Tesla could prove to be very powerful, bringing together the highly successful Model S with BMW’s electric city car, the i3, and its soon to be released i8 plug-in hybrid supercar.  Currently, Tesla, BMW, and Nissan account for roughly 80% of the world’s plug-in electric vehicle (PEV) sales.

Car charging companies are also looking to benefit from the technology transfer, with Car Charging Group, Inc. announcing its intention to integrate Tesla’s EV charging technology into its Blink EV charging stations.  Car Charging Group is one of the largest owners, operators, and providers of EV charging services in the United States and is also the owner of the Blink Network, one of the most extensive EV charging networks.

On the Sidelines

While the patent release by Tesla will surely increase collaboration with the major car manufacturers already producing EVs, it’s much less clear that open patents will move the dial on the major automakers that have largely steered clear of EVs in the past.  Toyota, GM, and several other major players are hedging their bets on EVs, and Tesla’s patent release is unlikely to change their position.

Navigant Research’s report, Electric Vehicle Charging Equipment forecasts that cumulative global sales of electric vehicle supply equipment (EVSE) will reach 25 million units by 2022.  Increased collaboration between the major EV players could lead to this figure being achieved ahead of schedule.

Cumulative EVSE Unit Sales by Region, World Markets: 2013-2022

(Source: Navigant Research)


What Constitutes “Grid-Wide” Storage?

— June 25, 2014

A recent article in The New York Times made the claim that energy storage technology is “decades away from grid-wide use.”  Reporter Jim Malewitz did not define “grid-wide,” so it is difficult to understand how this term is defined for the purposes of the story.  We can examine that prediction, though, based on various measures.

One measure could be grid generation capacity of the capacity of installed energy storage.  Given that on its own the U.S. grid has about 1,058 GW of total generation capacity, energy storage rightfully appears to be a drop in the bucket – to be precise, 0.07% of grid generation capacity excluding pumped storage and 2.2% including pumped storage.  It’s worth noting, however, that the solar PV industry is considered to be successful and growing, and currently represents about 1.1% of total generation capacity in the United States.  Moreover, the pipeline for energy storage is expanding rapidly.  Approximately 13,000 MW of storage capacity is in the pipeline – 3,000 MW of which is advanced batteries, compressed air, flywheels, and power-to-gas.

Energy Storage Capacity, Installed and Announced, World Markets: 2Q 2014

(Source: Navigant Research)

The First Thousand

A second measure could be the number of markets where storage is present and the variety of technologies in the market.  Navigant Research is currently in the process of updating its Energy Storage Tracker, which tracks 30 energy storage technologies in over 600 projects – some of which include more than one storage system.  Overall, 952 systems in 51 countries are tracked in the database.

Worldwide, there are 2,497 MW of deployed advanced energy storage projects – this excludes pumped storage, a mature technology that accounts for 124 GW installed.  Asia Pacific continues to be the world leader in deployed capacity of energy storage, with 1,184 MW of deployed capacity, which represents 43% of global capacity.  New pumped storage makes up nearly 60% of Asia Pacific’s capacity, followed by sodium-sulfur batteries, with 31% market share.  The market share of advanced lithium ion batteries is growing quickly in Asia Pacific, with 74 MW installed currently.

Demand Flattens

Western Europe (762 MW deployed, 28% of global capacity) is primarily composed of power-to-gas, compressed air, new pumped storage, and molten salt technologies.  North America (725 MW deployed, up from 566 MW in 3Q13) is more evenly divided among technologies, with compressed air, flywheel, lithium ion, thermal, and advanced lead-acid batteries composing a majority of the capacity.  Clearly, a number of markets and technologies are being deployed across grids globally.

One other measure could be the growth of storage relative to a traditional industry.  In 2007, 28 MW of advanced energy storage were installed.  In the subsequent 6 years, 1,300 MW have been installed.  More specifically, installed energy storage grew 28% between 3Q13 and 2Q14.   In contrast, electricity sales have decreased over the past several years in the United States, and the U.S. Energy Information Administration predicts that electric demand growth will average less than 1% per year between 2012 and 2040.

Although energy storage is unlikely to revolutionize the global grid system in the near term, it will certainly begin to scale up rapidly in the next 3 to 5 years.  Perhaps then it will be closer to grid-wide.


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