Summary
- Substantial new energy storage projects in North America, Europe and Asia.
- Key recent battery developments to be detailed at upcoming Battery Investor Day may cement Tesla's technological lead and give information on quantity increases.
- Battery supply may be finally meeting up with demand for the company.
- Energy storage a natural concomitant of the transition to renewable energy.
- Tesla's vertical integration advantages over competitors to be cemented through income opportunities such as V2Gs and VPPs.
Tesla (NASDAQ:TSLA) has seen its stock price soar on the back of the success of its auto division. This is unsurprising. There is a rapid worldwide shift from ICE vehicles to EVs. Tesla is the market leader in North America, in Europe and in Asia. Tesla is set to ramp up revenues further in the areas of FSD (full self-driving), of software and of subscription revenue.
The world is shifting rapidly from fossil fuels to renewables in the field of energy generation as well as transport. Tesla's unique vertical integration model will lead to huge revenue gains in energy storage as my article here detailed.
Having been supply-constrained in the past, new developments now indicate Tesla can finally start to meet the huge demand. My article here detailed some of the new supply sources and technological advantages for Tesla.
The Battery Investor Day in September will highlight further technological developments from Tesla. Already the last couple of months have shown a quickening pace of technological development coming out of Tesla.
The company's "Roadrunner" project is set to consolidate its already strong technological advantages. This has been the subject of much speculation, especially in regard to the million mile and 73-year (or 100-year) battery. It should also add detail of the quantities required by Tesla to meet soaring demand. News on technological developments at "Project Roadrunner" are eagerly anticipated by the market.
Strong recent drivers for Tesla's energy storage division include:
- A string of massive new utility projects.
- Technological gains to Tesla's suite of batteries.
- Large increases in the company's battery production capacity.
- Substantial increases in market demand driven by the surge in renewables.
- Promising new developments in China.
Elon Musk has always stated that his goal is to "help accelerate the advent of sustainable energy". The corporate target has always been to garner 50% of revenues from non-auto activities. Elon Musk restated this again at the Q2 analyst call. As he stated:
I think long term Tesla Energy will be roughly the same size as Tesla Automotive. So I mean the Energy business collectively is bigger than the automotive business.
This should lead to a massive increase in revenues for the company even as the auto revenues continue to surge.
Secular Trends
Batteries have been at the heart of technological and societal changes in the modern era. Improved batteries allowed for mobile phones, for mobile computing and for EVs. They will now allow for the biggest change of all: energy storage on a massive scale as the world shifts to renewable energy.
Figures from the International Renewable Energy Agency (IREA) show that almost three quarters of new electricity generation in 2019 came from renewable sources.
Renewable energy costs have fallen much quicker than most had predicted, as the Economist pointed out in a recent article. This is illustrated by the graph below:
There is a close symbiotic relationship between renewable uptake and energy storage uptake.
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