Morgan Stanley

Startups often focus on disrupting markets by having some penetrating insights, new technology or simply a desire to improve upon an existing product or service. Morgan Stanley’s report on Solar Power and Energy Storage contains a fascinating comment about the potential ramifications of Tesla’s focus on developing large numbers of electric batteries.

Image Credit: Sbharris, Wiki Commons

“Energy storage, when combined with solar power, could disrupt utilities in the US and Europe to the extent customers move to an off-grid approach. We believe Tesla’s energy storage product will be economically viable in parts of the US and Europe, and at a fraction of the cost of current storage alternatives,” it explains on page 1.

They go on to say why Tesla might have such an impact, “This advantage is driven primarily by the company’s very significant scale (Tesla will produce as many cells from its Gigafactory as are currently produced by all worldwide battery manufacturers combined) and integrated manufacturing efficiencies. We project the capital cost of Tesla’s battery will fall from the current $250/kWh to $150/kWh by 2020, whereas its closest competitor will be at a cost of ~$500/kWh,” it says on page 2.

The US Energy and Information Administration estimated that about 6% of the electricity transmitted and distributed each year is lost because of problems with national grid system. Six percent doesn’t sound like much, does it?

However, another estimate translated that number into dollars and came up with an amount for a single year, “Multiplying that number by the national average retail price of electricity for 2005, we can estimate those losses came at a cost to the US economy of just under $19.5 billion.” For ten years, the total lost would be $195 billion dollars, just due to grid  inefficiencies.

In a sense, the grid is also all the power plants connected to it, because they are the sources of the electricity. Coal plants are even less efficient, with only about 35% of the energy in coal becoming electricity after being burned and converted. An eventual grid defection doesn’t look so scary, when you consider that over the long term, we might be saving a lot of money and polluting our air, water and soil much less. Then, of course, there would be less climate change emissions contributing to that global problem.

Grid defection doesn’t have to 100% either; many early adopters could have home energy systems using renewables and remain grid connected in order to have a backup power system.

It’s hard to say when a tipping point might occur, but there have been a number of Americans that have lived off-grid or mostly so for a long time. Over 120 years ago, Charles Brush created his own wind turbine and home battery system.