SolarCity offering backup energy storage using Tesla batteries

SolarCity (SCTY +5.5%) is launching DemandLogic, an energy storage solution that's meant to complement its solar installations, and which relies on battery packs from fellow Elon Musk brainchild Tesla (TSLA +2.1%).

DemandLogic can act as a backup energy source during grid outages, reduce or eliminate the need for grid power during times when the sun isn't shining, and lower the "demand charges" faced by businesses (tied to peak grid usage) by acting as an electricity source during peak hours.

Much like SolarCity's panel installations, DemandLogic comes with no up-front cost, and is instead monetized via (10-year) service agreements.

SolarCity admits DemandLogic generally doesn't make financial sense for homeowners at this time, but argues some businesses paying steep demand charges could see an immediate benefit.

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Comments (18)
  • chfp
    , contributor
    Comments (720) | Send Message
    Makes perfect sense. Myself and others have been speculating that retired Tesla packs (which still have 80% capacity) are ideal candidates for re-purposing in stationary applications. Energy density isn't as important and the cells still have 10+ years life left. Win-win for both Tesla and SolarCity.
    5 Dec 2013, 12:33 PM Reply Like
  • 3D Investing
    , contributor
    Comments (1552) | Send Message
    "Myself and others have been speculating that retired Tesla packs "


    speculating? Elon said it himself that battery packs are retired after it reaches 80% and it will be used for industrial/commercial purposes. It would be common sense that SolarCity would buy it since it is partly owned and operated by his relatives.


    Not trying to take anything away from your comment. I just thought this was already known a while back and there was only one logical way it would go in most people's mind. I would call it more of an expectation than speculation.
    6 Dec 2013, 08:20 AM Reply Like
  • chfp
    , contributor
    Comments (720) | Send Message
    He hadn't said publicly it at the time
    6 Dec 2013, 10:43 AM Reply Like
  • Jacob Steinberg
    , contributor
    Comments (808) | Send Message
    I thought Tesla had a shortage of batteries and that's why it wasn't growing fast enough. Then why would it share its limited amount of batteries with another company? Something is fishy here.
    5 Dec 2013, 01:00 PM Reply Like
  • Dampflok
    , contributor
    Comments (1416) | Send Message
    Jacob, I believe you have to distinguish between new batteries and those not useful any more for in-car usage. However until somebody does some numbers, I don not believe that this very efficient and cost-effective.
    5 Dec 2013, 01:19 PM Reply Like
  • Dan Fichana
    , contributor
    Comments (1918) | Send Message
    It's simple, Tesla is probably selling the battery packs to Solar City at a larger profit than they could make selling the cars.


    Also if this is true and refurbished Tesla batteries can also be used as grid storage, this completely invalidates every single life cycle assessment since none have ever accounted for end of car uses for the batteries, this would drastically reduce the environmental impact of attributed to the manufacture of EV batteries.
    5 Dec 2013, 01:28 PM Reply Like
  • CDM Capital
    , contributor
    Comments (458) | Send Message
    I think Jacob brings out an interesting point, I really doubt that Tesla would be selling used batteries to homeowners. This would definitely need to be fully disclosed to the end customer, as there would be potential of long-term problems w/ used lithium ion batteries. On top of that how would you differentiate who gets the most used batteries & which customers get the slightly used batteries. I would definitely want to be the later if this was the case.


    In our opinion this is just another PR stunt to keep the stock price up until early 2014 so insiders can dump more stock in the next fiscal year. The total revenues from this little pet project might get to 500k(?), (likely on no profit at all to SolarCity.) The market cap added today ~ $300M, only on Wall St.


    Our thoughts:
    5 Dec 2013, 01:38 PM Reply Like
  • uncle_fweddy
    , contributor
    Comments (60) | Send Message
    Jacob, I see your point, but I understand that the batteries to be re-purposed, are of less use to Tesla than a new battery, which is not to say that they cannot be useful in another application; these are very expensive batteries, and I'm sure, even at 80% capacity, they are plenty valuable in dollar terms and in terms of some alternate functionality. Bear in mind, also, that Elon Musk's macro view must include all of his companies, not just Tesla. These used batteries have huge residual value for SolarCity, and even to Tesla. Another poster has pointed out that Tesla can sell the batteries to SolarCity, showing a nice profit. And if SolarCity needs batteries of this type, where better to procure them, than from their Siamese Twin, Tesla? I agree that it is a Win-Win solution for both companies, and another example of Elon Musk's brilliant "outside the box" thinking.
    5 Dec 2013, 02:39 PM Reply Like
  • user 18190162
    , contributor
    Comments (3) | Send Message
    I doubt SCTY would buy batteries that are too expensive. While a great theoretic idea, I don't think the economics will pan out. Or maybe they do over the super long term which means even more debt for SCTY which means focus on what you're good at. I don't think SCTY needs more debt on their plate at the moment.
    5 Dec 2013, 03:38 PM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1558) | Send Message
    SolarCity and Tesla are simply taking the logical steps towards the inevitable system that will power all new homes in the next 5-10 years.
    Data, data, data is king at this point. Tesla and Solarcity are learning at a geometric rate now in terms of how an EV + solar panel + battery backup can work together as single unit.


    Each aspect of the system (yes even EV pack size) will eventually be fine tuned to each home's individual requirements based on home size, number of people living within, average daily energy use/ driving distances, etc. The system will also be easily increased/decreased by adding/removing solar panels and modular battery packs.


    I have long said that Tesla, Solar City, and Shea homes (an eco home builder already offering zero energy bill homes with SolarCity) will soon bring their partnership full circle in this manner and will offer this entire package upfront with no money down and roll costs for eco home, EV, solar panels, and battery backup system all into one easy mortgage-like monthly payment.
    The total of which would amount to way less than the sum of a standard home mortgage + utility bills + standard ICE car lease + gasoline bills + ICE vehicle maintenance bills + ICE generator (as you are now virtually independent of the grid this should be included for the advantages it brings in terms of grid outages / storms/ etc.)


    Nobody is in a better position to offer the home of the future + car of the future than Tesla + Solar City...invest accordingly guys.
    5 Dec 2013, 03:39 PM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1558) | Send Message
    Cdm...Tesla has all the equipment to fully test all used batteries to determine their charge rate/ remaining useful life/ etc. They will simply promise customers that their battery backup system will hold x amount of energy for x number of years. So long as they do the customer will never know or care if they have a used pack or not.
    I imagine Tesla could fill any shortcomings with new 5-10 kWh packs added/removed modularly as needed.
    The future possibilities are really endless as to how it can all be integrated between Solar array size, battery backup size, and EV pack size...all to give the user the most efficient system based on their needs.
    As I said these first steps now are all about data, data, data.
    In 5-10 years we will see real benefits and affordable options for the middle class. Closer to 5 than 10 I believe.
    5 Dec 2013, 03:39 PM Reply Like
  • SenseTheWorld
    , contributor
    Comments (19) | Send Message
    Not all batteries are the same. What Tesla needs for Model S/X is a battery with customized chemicals, which has a limited supply at the moment. But for this SolarCity deal, they could simply use the regular 18650 cells used in laptops. For this type of battery, I donot think there is any kind of supply problem.
    6 Dec 2013, 08:50 AM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1558) | Send Message
    Good point SenseTheWorld...weight and energy density are not as big of a concern when going from a vehicle battery to a stationary energy storage unit. Tesla will be looking at this closely.
    7 Dec 2013, 06:08 PM Reply Like
  • JackB125
    , contributor
    Comments (428) | Send Message
    We don't have all the information on this, but I expect the usual "strong opinions" (polite euphemism) will quickly appear.


    The Tesla folks are pretty good business people. With that opinion & no other information, here is my pure speculation...


    Some small percentage of 18650 batteries that Tesla receives don't quite qualify for use in their battery packs. These are still good batteries for other uses, but they just miss the bar of Tesla's battery pack standards. So, rather than return these batteries to Panasonic for replacement, they...


    1) use these batteries for specialty purpose battery packs sold at a premium to SolarCity; and,


    2) negotiate a further discount on the 18650's with Panasonic for this non-returns practice.


    Results are a cost reduction for their Model S battery packs & a new revenue stream to Tesla from SolarCity.


    The above is 100% pure speculation -- no actual data involved. However, it is also a plausible scenario.


    In the spirit of full disclosure (and this will be no surprise), I am LONG (5+ year outlook) Tesla.
    5 Dec 2013, 02:52 PM Reply Like
  • Reel Ken
    , contributor
    Comments (6691) | Send Message
    What if a SolarCity inhabitant dropped a trailer hitch on a used battery and it caught fire? Should we recall them?


    p.s. Just a joke, lighten up all you bulls
    p.p.s. See how ridiculous it sounds, lighten up bears.
    5 Dec 2013, 05:49 PM Reply Like
  • wiserinvestor
    , contributor
    Comments (586) | Send Message
    None of this news changes the fact that today's Lithium technology is far too expensive for use in grid tie or off grid storage applications. The one thing that has kept customers away from backup products like these is the high cost. And that's for lead acid based technology. The Lithium Ion technology used by Tesla is far, far more expensive than lead acid. Throw a lease on top of it and it will probably be even more expensive. and purchasing the technology will probably be out of the question. It will be interesting to see how SolarCity intends to make this pencil out for businesses or especially residential applications.
    6 Dec 2013, 12:15 AM Reply Like
  • wiserinvestor
    , contributor
    Comments (586) | Send Message
    This won't do anything for the residential market. Even at a 60% reduction, a residential grid tie battery backup system using Li-ion technology will still be far too expensive to make it pencil out. Industrial/commercial applications with their demand charges yes, residential, not for at least 8 to 10 years. And SolarCity will still need to get past the regulatory hurdles. So Cal Edison as well as other utilities are currently not allowing residential grid tie battery backup systems to connected to their grid.
    2 Mar 2014, 08:01 PM Reply Like
  • BigStickSoftStroke
    , contributor
    Comments (32) | Send Message
    Yes, very expensive batteries. Musk is doing everything possible to justify the cost of his giga battery plant. I do not think he's going to sell enough cars at a cost that he thinks he will be able to achieve the cost of that plant even with all the taxpayer assistance. The federal and state solar energy credits are gradually disappearing. This will make it that much more difficult for an individual to install a solar system yet on top of the battery power storage system even if Musk picks up the whole front end cost of his residential system. I agree this could change the utility industry and the grid entirely but how many years down the road will it happen? I have a feeling it is a long way off. The same as Obama's prediction of 1 million electric vehicles on the road this year. Turns out 25,000 was a better prediction. Musk must keep his stock price up with continuing new ideas whether they are functional or not. He has to keep rolling and fast before something better is developed like the Stanford university aluminum and graphite battery.
    1 May 2015, 05:38 PM Reply Like
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