Navigant Research Blog

Six Questions Regarding Tesla’s Gigafactory

— February 27, 2014

This week, Tesla revealed the first details about its plan to build an enormous battery factory to provide cells for its future electric vehicles.  Among the revelations: the factory will be powered primarily by its own solar and wind power parks; it will produce more than 50 gigawatt-hours (GWh) of battery packs a year; and it will cost $6 billion to build.  To kick things off, Tesla also filed to sell $1.6 billion worth of convertible bonds today.

While these are intriguing details, there’s still a lot to determine about what this factory will actually look like.  Here are my questions about the Gigafactory:

Why isn’t California one of the states being considered for the plant?  The company named Nevada, New Mexico, Arizona, and Texas as potential host sites.  To build the batteries in a different state and then ship them to California, even by rail, will add considerable cost to the batteries.  Why not locate the factory at or near the company’s vehicle assembly plant in Fremont, California? My guess is that environmental regulations for such an enormous factory are one negative factor weighing against California.  That leads to a second question: Where will the cars be built?  The batteries coming from this factory will be going into Tesla’s next-gen passenger car, not the Model S or Model X.  That means that a car factory could also come along with the battery plant.

How much wind and solar will be needed to supply power to the plant? A battery factory making 50 GWh of batteries will require enormous amounts of electricity – some for the actual making of the batteries and some for the initial charging of the batteries that is the last step in the manufacturing process.  This could require as much as 1 GW of renewable energy projects.  Is the price of those installations factored into the stated $6 billion cost of the factory?

Where will the extra 15 GWh of batteries come from? In the slides that Tesla distributed, the manufacturing capacity of cells was stated as being 35 GWh.  But the manufacturing capacity of packs was stated as being 50 GWh.  So where will the extra 15 GWh of cells come from?  From other battery company factories throughout the world? From more Gigafactories?

Why is this factory so cheap? $6 billion doesn’t sound very cheap.  But it actually pencils out to a little more than two-thirds the cost, on a per GWh basis, of other large battery factories.  Clearly, the large scale of the factory will make equipment purchases cheaper.  Nevertheless, the estimated cost of the factory seems extremely low and brings into question whether Tesla and its battery partners have some new manufacturing innovations up their sleeves.

Why wasn’t Panasonic mentioned in the news release? Most observers assume that Tesla will build the factory with Panasonic, which makes all the cells for the Model S and the upcoming Model X.  However, the news release only stated that the car company’s “manufacturing partners” will help finance and build the factory.  Is it possible that another battery supplier is inserting itself in between Panasonic and Tesla?

How much will the cells cost once the factory is up to scale? Tesla CEO Elon Musk has stated in the past that Tesla buys its cells for between $200 and $300 per kilowatt-hour (kWh).  The slides distributed with the Gigafactory announcement claim that the facility will be able to cut the costs of the battery packs by 30%.  But how much of that comes out of cell costs versus price cuts in the other equipment in the pack?  Does this get Tesla down to $175 per kWh? To $100 per kWh?

There’s no denying that this is a bold venture.  If the company manages to follow through on these plans, it will construct the biggest factory in the world (not just for batteries, but for anything).  And it will yet again echo Henry Ford’s spirit with a 21st century version of the original megafactory, the River Rouge complex.


Winter Cold Shows Value of Plug-in Vehicles

— December 27, 2013

Over half a million utility customers in the northeastern United States and Canada were without power Christmas Eve following major snowstorms and frigid temperatures earlier in the week.  By late Christmas day, utilities in Michigan, Maine, and Toronto had returned power to many affected by the outages, but as of December 26, thousands were still without power.   Twenty-seven deaths were attributed to the storms and resulting power outages.  Many of the deaths were caused by traffic accidents and by carbon monoxide (CO) poisoning stemming from diesel generator use.  Though cold weather can reduce the driving range of plug-in electric vehicles (PEVs), future PEVs with bidirectional power capabilities could have significant value in cold weather climates.

The U.S. Consumer Product Safety Commission reports that an estimated 200 people in the United States die from CO poisoning associated with fuel-burning heating equipment every year.  CO poisoning is more common in winter months than summer months and is especially dangerous during power outages when diesel generators kick on to supply power to homes.  CO detectors are the best way to prevent CO poisoning, but the adoption of PEVs with bidirectional power capabilities can add security.

Generators On Wheels

Japanese PEV automakers Nissan and Mitsubishi have spearheaded the development of bidirectional systems, alongside the companies’ respective PEV models, the LEAF and i-MiEV.  These systems attach to the vehicle’s DC charging port and convert the DC power from the battery to AC power, which is compatible with the common home electrical system.  The Nissan system provides up to 6 kW of power and the Mitsubishi system can provide 1.8 kW.  Old fashioned incandescent light bulbs are rated between .04 kW and .06 kW, so these systems can keep the lights on for quite some time in the event of an outage.  Unfortunately, these systems are currently only available in Japan.

In the United States, development of PEV bidirectional capabilities has been focused almost entirely on fleet vehicles.  Vehicles developed by VIA motors, Electric Vehicle International (EVI), Boulder Electric Vehicle, and Smith Electric Vehicle are being used by fleets for various applications – primarily using bidirectional systems to enable fleets of PEVs to participate in grid operator-managed frequency regulation markets.  However, utilities have grown increasingly interested in the technology for emergency response applications.

A Nissan LEAF may be able to provide power to one home, but a utility-owned commercial PEV could supply power to an entire neighborhood.  VIA motors and EVI have developed PEVs for this purpose with power output capacities from 15 kW to 100kW.  These vehicles can not only get technicians to downed lines and damaged equipment but can also provide power to cold, dark homes.  A bidirectional PEV, whether in a garage or at the distribution transformer, can reduce the need for CO-emitting diesel generators for backup power support.  PEV automakers pioneering bidirectional capability as an option on their vehicles will be wise to bring their products to markets in outage-prone regions.


Winners Emerge in EV Battery Race

— November 4, 2013

In the fall of 2007, General Motors announced the launch of a new program to develop a plug-in car called the Chevy Volt, officially launching the advanced battery industry.  For such a car to work, a new kind of battery had to be created that was affordable but with more energy dense than existing batteries.  Soon, every carmaker, battery manufacturer, electric utility and consumer electronics company sidled up to the table and placed their bets on this emerging industry.  Now, 6 years later, the first stage of this horse race is over and the judgment can begin to determine winners and losers.  Here are the initial winners, in my view:

Lithium Ion: By far the biggest winner is the chemistry that has taken up more than 99% of the market: lithium ion.  While the drawbacks to Li-ion are well-known (fire potential from thermal runaway, cost, lithium supply constraints), each has been mitigated by a combination of engineering advances and economies of scale.  Li-ion batteries have completely taken over markets, a few years after entering them.  This happened in consumer electronics, power tools and electric vehicles.  And the price of Li-ion batteries has dropped dramatically—so much so that other, supposedly cheaper, chemistries have had no chance to compete.  For a closer look at the current state and the future of the Li-ion battery segment, please join us for our webinar, “The Lithium-Ion Inflection Point,” at 2 p.m. ET on Tuesday, November 5.

Tesla/Panasonic: Of all the players in this space, the ones who made the biggest bets on the future of advanced batteries either don’t exist anymore (Better Place, Coda Automotive) or have triumphed.  In the latter category, the best example is the Tesla-Panasonic partnership.  Both companies bet big that their battery solution would win out.  And both have reaped the rewards.

Tesla’s concept of using small-format batteries in combination with an expensive and sophisticated thermal management system has worked very well.  Panasonic put all of its chips on its new nickel cobalt aluminum cathode battery that powers the Tesla Model S.  The success of that car has saved Panasonic’s battery business and its factories are now operating at full capacity while its Japanese brethren such as Sony and NEC see the demand for their batteries declining.

The Observers: Ironically, the other big winners of the initial stage of the advanced battery race are the companies that haven’t placed any bets at all — yet.  Hyundai Motors is one example.  The company has not made any big investments in the electric vehicle space, but is now poised to enter that market in a big way, without being dragged down by stranded manufacturing investments.  Likewise, Johnson Controls, whose Li-ion subsidiary is overshadowed by its massive lead acid battery business, is now able to enter the market in manner of its own choosing, with a keg full of dry powder and a much more visible path to success.

In my next blog I’ll review the losers, so far, in the advanced batteries space.


Hidden Batteries Show EV Promise

— October 23, 2013

Automakers have pursued a number of strategies to develop electric vehicles (EVs) that are affordable and have ranges competitive with conventional internal combustion engines.  The challenge is that EV batteries account for a significant chunk of the vehicle’s total weight, space, and cost.  As more energy storage (in terms of kilowatt-hours, or kWh) is added to the vehicle’s battery to extend range, more weight is added to the vehicle, thereby decreasing its range.  At some point, diminishing returns set in: the amount of miles per kWh begins to decrease with each kWh addition.  Since the battery is the most expensive part of the EV, the key is to find the point at which the mile per kWh figure is optimized so that the vehicle can be competitively priced.

Many automakers have invested in battery companies to develop batteries that are more energy-dense per kilogram (kWh/kg).  Others, like BMW, have pursued vehicle lightweighting by using expensive, low-weight materials like carbon fiber for various vehicle parts (such as body panels).  The decreased weight of the overall vehicle allows the battery pack to be larger, thus increasing the range.  The cutting-edge technological development lies at the intersection of these two strategies – using structural vehicle body parts for energy storage.

Structural Batteries

Swedish automaker Volvo revealed such a strategy in mid-October.  The company replaced what is typically a steel trunk lid and crossmember over the engine bay of a Volvo S80 with parts made from nanobattery- and supercapacitor-infused carbon fiber.  Both parts are lighter in weight and torsionally stronger than their steel counterparts.  They’re also, of course, significantly more expensive.  Factoring in reductions to standalone battery costs could prove this technology’s business case in the future, especially as carbon fiber becomes more commonplace in vehicles.

The concept is not all that different from building-integrated photovoltaics (BIPV), which utilizes PV materials and panels in building structures rather than on top of building structures.  The theory is that the PV materials are more expensive than the materials they replace, but less expensive than the cost of those materials and a separate PV system.  Additionally, more building space can be utilized for PV generation.  In its report, Building Integrated Photovoltaics, Navigant Research forecasts that BIPV will soon become one of the fastest-growing segments of the solar industry.

Mind the Door

The major difference between the two concepts is the fact that vehicles are more prone to damage than buildings.  Utilizing common exterior body parts as expensive energy storage units provides additional anxiety to vehicle owners and emergency first responders concerning major accidents and/or simply getting a door slammed into the vehicle at the local supermarket parking lot.  But cutting-edge technologies tend to morph as they approach commercialization.  It’s likely that integrated batteries will find their way into other alternative drive vehicles, such as stop-start vehicles (SSVs) and hybrid electric vehicles (HEVs), and into structural parts that aren’t exposed.


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