Will Tesla’s Battery Enterprise Become Larger Than Its Electric Car Business?

Ever since a vague tweet from Tesla CEO Elon Musk on March 30, there has been a great deal of speculation about the company’s developments of a battery to power homes and businesses. Now, additional information about the concept is coming out, with an official announcement scheduled for April 30 at the company’s Hawthorne, California facility.

Reports indicate that Tesla has already supplied its batteries to large customers for field testing, including Walmart and Cargill, as well as to several hundred residential homes. According to a report in The Guardian, the batteries will be available by lease to consumers, and will help to provide power during blackouts as well as storing solar energy to reduce energy costs for homes and businesses.

To date, no one in the power industry has been able to develop a cost-effective method for storing large volumes of energy for later distribution. Analysts are suggesting that Tesla’s massive $5 billion “gigafactory,” which is currently under construction in Nevada, will enable the mass production that is required to drive down the battery cost to make them viable for a broad range of customers, including traditional energy suppliers.

Certainly, there is a great deal of anticipation around Tesla’s upcoming announcement this week, with reports indicating that the company will release details of its home battery as well as “a very large utility scale battery.”

“Whatever Tesla announces on Thursday is just the beginning,” said Peter Rosegg, representative for Hawaiian Electric Co., where 12 percent of the utility’s customers have rooftop solar panels. “Tesla doesn’t have to go after the market – the market will come to them. We’re very eager to see what they have to say.”

Tesla appears to be taking a big step in a business that is expected to experience massive growth in the future. Navigant Research reported earlier this year that worldwide revenue from grid-scale energy storage could reach more than $68 billion by 2024, as renewable resources multiply and electricity grid operators seek methods to balance their mix of generation assets.

“We need the ability to store energy when it’s bountiful and use it when it isn’t bountiful,” Karl Brauer, a senior analyst at Kelley Blue Book, said to ABC News. “If somebody can come up with a system to time shift energy storage, that would have a lot of potential and go far beyond the automotive industry.”

According to media reports, Musk plans to combine the strength of Tesla’s patented lithium-ion batteries with its expertise in power management software. Musk’s tweet about the company’s upcoming announcement said, “For the future to be good, we need electric transport, solar power and (of course) … the missing piece.”

The potential is huge. If Tesla creates a product that will be used by utility companies that have traditionally generated power with coal and natural gas, the company could move into a massive new business that would catapult it far beyond the auto industry.

“Tesla isn’t just going to sell batteries to SolarCity,” suggested Ben Kallo, an analyst with R.W. Baird & Co. “They are going to sell to project developers, wind and solar developers, and directly to utilities. The residential project isn’t going to be a huge needle mover in the near term, but the numbers are very big on the utility side.”

However, Tesla may face competition from other battery makers, including Korea’s LG Chem Ltd., as well as power providers such as AES Corp. and startups like JLM Energy. The company will also have to navigate regulatory hurdles in this initiative.

If Tesla’s initiative proves to be successful, it could open up a new world for the company, and could provide a massive new revenue source to aid with the continuing development of its electric vehicle technology. Perhaps the company’s battery business will grow to be a much larger enterprise than its electric car business over time.

The possibilities are certainly exciting, and we’ll all be listening eagerly to hear the details of what Tesla is planning for the future when the company makes its official announcement this week.