Elon Musk's mission to give us a future without fossil fuel
Will new Tesla batteries become the power source for humanity, or will they fail to ignite?Neil Churchill May 11, 2015
When a company takes orders worth an estimated $800 million in the first few days of a new product announcement, it is fair to say that the launch of said product has been quite a success.
There are few other businessmen in this world who could have achieved such fanfare. Apple causes a stir when it brings a new product to market, but that's the world's biggest company. Elon Musk's name and presence alone was enough to make the tech world swoon when he announced a new type of battery just over a week ago. He has become the new Steve Jobs - when he talks, the world listens.
The new low-cost solar battery will, according to Musk, provide power for homes and businesses, helping to make the world less dependent on fossil fuel. The smaller 7kWh 'Powerwall' battery will be for everyday use in homes, with the larger 10kWh model used as a backup. The 'Powerpack' model is designed for utility companies to help with their wind and solar energy supplies, or as a backup for when grid demand is at a peak. Musk claims that two billion Powerpacks could store enough electricity for the entire world’s needs.
Priced at $3,000 for the smaller and $3,500 for the larger Powerwall models, Musk's company has already taken orders for over 40,000 batteries, meaning they are sold out until mid-2016. The lithium-ion batteries will initially be manufactured at Tesla's factory in California, before production moves to a new facility in Nevada in 2016, which will be the biggest lithium-ion battery farm in the world.
But already, and not surprisingly given that, while Musk is often called the real life Tony Stark, his work on his Tesla and SpaceX programmes haven't been without their hitches, the new battery's reliability and readiness to serve all of humankind has been called into question.
Being one of the world's best examples of a genuine entrepreneur, Musk unsurprisingly sits on a number of different boards. One of them is SolarCity, the biggest installer of rooftop solar panels in the U.S. Naturally then, you would assume SolarCity would be the ideal client for Musk's own Powerwall batteries. Your assumption would be wrong.
Speaking to Bloomberg, a SolarCity spokesperson said that it doesn't make financial sense for the company to use Musk's new batteries. In its current infancy stage, the batteries do not work well enough with rooftop solar panels. Also, solar customers in the U.S. can sell back electricity that they currently don't use - something that won't be possible with Musk's batteries.
If customers want to move completely off the grid and rely solely on Powerwall or Powerpack delivery, that's not possible yet either. The bigger residential battery, the 10kWh for back up situations, isn't yet designed to go through more than 50 charge cycles a year, which just isn't viable for SolarCity. There is also a small question mark over Tesla itself, Musk's company which is developing the batteries. While it is 17-years old, it is yet to turn a profit. Fair enough, start-ups can take a while to make money - Musk has said it won't happen for Tesla until 2020. But the new batteries may well become dependent on the success of Tesla as a whole.
Tesla's investors have waited patiently for the business to turn a profit. The company has a high capital cost and is investing back into the business. But if Tesla doesn't continue to grow, and doesn't meet its future profit targets, then the whole company could be in trouble.
Tesla's market cap is $29 billion, but last year the company turned just $3.2 billion in revenue with a net loss of $294 million. The new gigafactory being built by Tesla in Nevada - where the batteries will be made - requires $10 billion of investment. Put simply, Musk needs his company's investors to be the most patient, and deep-pocketed of investors there are. Incidents such as SpaceX's failed attempts to develop reusable rockets for spacecraft do not help the public opinion, nor investor confidence in Musk or Tesla. Of course, what Musk is trying to do with his SpaceX company is commendable. If indeed he does manage to develop reusable rockets, it will transform the cost of space travel, ushering in its commercial age.
But negative news has knock-on effects, and if Tesla's new lithium-ion batteries really are going to replace the world's dependence on fossil fuels, then Musk needs as few knocks as possible.