Gigafactory & the Looming Necessity of Batteries

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Batteries. Admittedly not the most enchanting of technologies, but nevertheless one that powers virtually all portable consumer electronics. That being the case, there are interesting projects underway in the battery world. Not the least of which is construction of Tesla’s Gigafactory – an immense lithium-ion battery manufacturing plant that will produce more batteries in a year than the world’s current production output combined. What’s more, news in recent days is that construction is ahead of schedule – the Gigafactory, which was announced in February 2014, will reportedly be operational in 2016, and not 2017 as was first planned.

Located outside of Reno, Nevada, the site 980-acre site will be home to some 10 million square feet of factory space. That’s big. Really big. In fact, some $16 million is being spent on foundations alone. The factory is expected to employ some 6500 persons and will be run off solar and wind power (naturally).

The Gigafactory is a product of Elon Musk’s vision for accelerating the transition towards clean, sustainable energy production and consumption. As Chairman and Co-Founder of SolarCity, as well as CEO, Chief Product Architect, and Chairman of Tesla Motors, the plant is a ambitious reflection of Musk’s characteristically bold attitude.

Ostensibly a Tesla company project, the ambitions are inextricably tied to SolarCity – the photovoltaic (PV) systems provider.  A $5 billion investment, the Gigafactory is much more than a production plant – it reflects a pragmatic response to a future we’re rapidly moving toward. A future in which batteries occupy a most prominent position as a necessary technology at the core of a sustainable world.

To understand the scope of Musk’s intentions with the Gigafactory we must look toward the profiles of Tesla and SolarCity respectively. The stories and challenges at hand reflect issues much greater than the two companies; but in considering them, we can elucidate issues that are of massive consequence to many other industries, not the least of which is the necessity of lithium-ion batteries in solutions to some to the greatest challenges of the near future.

 

A Common Vision for Sustainable Energy Production, Storage and Use 

With everything from cameras and mobile phones, Nintendos to laptops using lithium-ion batteries, there’s massive demand. But bringing additional pressures to the lithium-ion battery market is the rapid rise of renewable energy solutions and growth of the electric vehicles market.

To understand the reasoning behind such a massive investment in the Gigafactory, it’s necessary to recognise how Tesla and SolarCity ambitions merge. Seemingly, an innovative electric car company and a solar power utility provider have little in common other than their belonging to the sustainable technologies sector (and Musk himself). However, as discussed previously at Phlebas (On Advances in Energy Storage Systems), both companies have a future that’s critically dependent on access to lithium-ion batteries.

SolarCity designs, finances and installs PV energy systems in the United States. Having been established in 2006, the company has grown rapidly in recent years in line with a surge in PV installations to the point where it owns 39% of the US residential PV market and shares 50% of the total US PV market with one other company (Vivent Solar, PlanetSave).

SolarCity design, manufacture and install residential solar PV energy systems. While generating electricity is possible, a prominent challenge is provision of complementary energy storage systems which allow households to be wholly independent in their energy needs. Image rights: SolarCity.

SolarCity design, manufacture and install residential solar PV energy systems. While generating electricity is possible, a prominent challenge is provision of complementary energy storage systems which allow households to be wholly independent in their energy needs. Image rights: SolarCity.

SolarCity is poised to become the world’s principal distributed utility company, and a major driving force for solar power’s ability to under-cut traditional utility companies in a manner outlined below. Our adoption of solar technology is an imperative if we’re to begin fixing the world’s energy problems – there is no other way. SolarCity recognise this, and are advancing solutions duly.

Tesla meanwhile, design and manufacture the most successful electric vehicle to have ever been developed – the Model S. To Musk, it is an inevitability that all vehicles will go electric – it is simple a matter of time. Encouraging this mindset is Musk’s firm belief that, independent of environmental concerns, developing means of sustainable transport is one of the largest problems to solve this century (TED talk – Elon Musk: Revolutionising the Energy Industry). With Tesla, Musk’s goal is to accelerate that transition.

 

A Brief Profile of Solar PV

There’s been tremendous growth in the PV market over the last few years. The US solar industry, which represents the market with the largest growth, has gone through a 1200% increase in utility-scale capacity since 2008 according to the US Energy Department (Cleantechnica). While considerably smaller, a significant proportion of PV growth stems from residential installations.

Image rights: US Department of Energy.

The rising demand for solar PV over residential, non-residential and utility sectors.  Image rights: US Department of Energy.

In short, decline in costs of PV technology, significant government subsidies (particularly in the US under Obama’s Sunspot Initiative) together with increases in system efficiency, is making it ever-more economically viable, and attractive, for homeowners and commercial sectors to adopt solar power and generate their own electricity. In residential instances particularly, it’s possible for a household to generate more than enough electricity to meet its ordinary needs, and sell back excess energy to their utility grid.

It’s a trend that’s only going to increase in the coming years. But there are challenges.

A catch with transition to renewables is that until efficient energy storage systems are available for those generating their own electricity, there will always be a level of dependence on conventional utility grids, which produce energy from carbon-based fuels. Solar power after all remains an intermittent source of electricity – nights, stormy days and so on, can leave PV-fitted households without power unless they remain grid connected.

This dependence represents a particular barrier to further growth of residential and commercial PV systems. But developing efficient storage solutions is also an inherent obstacle in the path of all renewable sectors geared toward fostering the transition away from carbon-based industries. All renewable utilities – wind, solar or marine – share the same challenge; and a solution would substantially enhance our capacity to utilise these resources in a manner essential to making clean, renewable energy the plurality of our power production, capable of balancing generation with demand.

Effective storage systems provides the means to ensure that surplus renewable electricity may be stored when generation is high, and then discharged when demand is increased and/or generation is low.

It is here where batteries – as energy storage devices – come into play. For all the growth of PV, once we begin installing energy storage alongside generation systems, the market will take off in an unprecedented manner. Combined storage-generation systems will make adopting solar power more efficient and viable; paving the way for our turning away from carbon-based power generation, and empowering individuals.

 

Energy Storage Systems

Unsurprisingly, SolarCity have been working on developing an energy storage system that will allow for efficient residential generation-storage. In late 2013, SolarCity CEO Lyndon Rive and Musk announced that SolarCity and Tesla would be partnering to produce such a system to complement SolarCity’s installations.

While the commercial Tesla/SolarCity residential battery system hasn't been unveiled yet, both have been installing pilot systems.

While the commercial Tesla/SolarCity residential battery system hasn’t been unveiled yet, both companies have been installing pilot systems.

The plans entail a battery going into every new residential installation within the next 5-10 years (CleantechnicaSolarCity release). The system – ‘DemandLogic’ –  will integrate software with battery technology to reduce domestic and businesses’ peak demand, and provide backup power during outages.

Just last week Musk released a statement about this project:

We are going to unveil the Tesla home battery, the consumer battery that would be for use in people’s houses or businesses, fairly soon. We have the design done, and it should go into production in about six months or so.

We’re trying to figure out a date to have the product unveiling. It’s probably in the next month or two.

SolarCity is already invested in a generation-storage pilot project involving some 500 PV-fitted homes in California. The project installed Tesla’s 10-kilowatt-hour battery packs and can power homes for about two days. The company are also installing Tesla batteries in commercial properties – with energy bill savings allegedly between 20-30%. Taking this further, plans for the near future involve ramping up the generation-storage model into a commercial model.

Forecast storage market Image rights:  GTM Research.

Forecast storage market.  Image rights: GTM Research.

Naturally, SolarCity and Tesla are not the only players in the energy storage sector. This is a broad market (see Cleantechnica article for insights), but it’s one with enormous potential for growth: GTM Research forecast an annual solar energy storage market of $1 billion by 2018; while the global market for grid-connected residential PV generation-storage is estimated to grow tenfold to reach more than 900 MW in 2018, compared to just 90 MW in 2014 (IHS).

 

A Brief Profile of Tesla Motors

Although a relatively small proportion of the battery market for the meanwhile, production of electric vehicles is pitched to increase massively, even in the near future.

Tesla is of course a forerunner in the electric vehicle market. With its Model S in production and sales of around 20,000 in 2014, and two models forthcoming, Tesla has committed itself to re-defining the landscape of the automobile industry.

Tesla's Model S 85D. Image rights: Tesla.

Tesla’s Model S P85D. Image rights: Tesla.

Tesla’s commercial model is a carefully crafted three-step approach to accelerating the advent of electric transport. Step one: high-price, low-volume production (evidenced by the Roadster sports-car). Step two: medium-price, medium-volume (the Model S, which ranges from $62,000 to $87,400). Step three: low-price, high-volume (the forthcoming third generation Model 3).

The logic here is sound – produce a high-performance luxury electric vehicle that demonstrates electric drive technology, attracts consumer interest and convinces people in the value of going electric. Next, go on to launch a vehicle at a substantially lower cost, capitalising on proven technologies and established infrastructure, financed largely off profits of prior steps. It’s in this latter model, targeted at the mass-market with a price tag of around $30,000, that Tesla place hope of beginning to substantially shift the proportion of electric vehicles on the road.

So far Tesla are on track. Their Model S has proven a global success – with quarterly sales increasing steeply since its launch in 2012, late last year Tesla sold its 50,000th Model S (Hybrid Cars). To say the very least (noting that this isn’t a review Tesla vehicles): a range of over 200 miles, instant torque, 0-60 in 3.2 seconds, proven driving technology, and superb design features, it’s fair to say Tesla have produced an outstanding vehicle, of extraordinary significance – something reflected duly in the accolades awarded to the Model S (infographic).

We wanted to demonstrate that an electric car can soundly beat gasoline cars on efficiency and pure performance.

Elon Musk

Assuring a holistic approach, Tesla have invested heavily in developing the infrastructure to support charging of electric vehicles by way of their Supercharger Stations. These charge vehicles exceedingly quickly – the Model S can be charged to provide 170 miles of range in about 30 minutes. Globally, there are as many as 385 Supercharger Stations (providing 2096 Superchargers) in a network that’s rapidly expanding. The US and Europe is virtually entirely covered, and certainly will be by the end of 2016. Charging is free for Tesla owners – something Musk insists will never change.

Tesla Superchargers. Image rights: Tesla Motors.

Tesla Superchargers. Image rights: Tesla Motors.

So Tesla have captured the world’s attention, and laid foundations for moving on to stage three in the coming year. But it goes without saying that in order to succeed in this venture, Teslas must not only fulfil requirements expected of any vehicle  – performance, design, and so forth – but provide enough power over sustained periods to make them an attractive, viable alternative over combustion engine vehicles. Battery technology is at the very centre of this ambition.

Currently, Tesla source battery cells from Panasonic, which they turn into 60 kWh and 85 kWh variant battery packs for the Model S. Teslas are built in Fremont, California – but the plant doesn’t have the capacity to meet Tesla’s future production needs.

Between the Model S sales still increasing, the Model X due out later this year, and crucially with the Model 3 on the horizon to realise Tesla’s intention of getting serious with mass-marketing electric vehicles, they’re going to need a lot of batteries.

The Gigafactory’s annual output of 50 GWh would be enough for some 500,000 Tesla cars. That may seem a lot, but consider that some 100 million vehicles are produced annually – a transition to even a significant proportion of new vehicles being manufactured electric is a daunting prospect.

 

Ambitions for the Gigafactory

Combine an eventual dramatic uptake in electric vehicles with the utilities revolution that surrounds energy generation-storage systems coming of age, and its plain to see that a deficit, without the likes of the Gigafactory, is all but inevitable. Simply put, the world’s current battery production capacity of about 33GWh is nowhere near the levels determined by the demand of coming years.

All things considered, it’s of no surprise that Musk is taking matters into his own hands and constructing a lithium-ion battery plant of his own. At least 30% of the Gigafactory is said to be set aside for production of stationary batteries for SolarCity; the remainder will be oriented towards Tesla, while the plant will also be open to contract from third parties.

Image rights: Bob Tregilus (CC BY-NC-SA 4.0)

The Gigafactory rises from the sands of Nevada. Click image for full resolution. Image rights: Bob Tregilus (CC BY-NC-SA 4.0)

Jump-starting the US battery industry isn’t new – in fact, as recently as 2009 a $2.4 billion grant program was set up by the US government with just this intention. But the history of that program is littered with failures – largely because there wasn’t enough demand. Just a few years later, and it seems that the market is at an altogether different point.

Still, the risks remain high. Succeeding in construction of an efficient plant, fitted out to produce a high performance batteries – a notoriously complex process that’s historically been driven by companies with expert knowledge and years of industry experience – is a major challenge. Beyond this, SolarCity and Tesla are banking on massively increasing their sales in order that battery demand meets the plant’s production output.

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The assembly line at Tesla. Batteries are the most expensive and heavy component in electric vehicles whilst also determining key aspects of drive performance.

There are grounds for having confidence in the bet however. Firstly there is the expected growth of residential generation-storage, that was noted earlier – forecast to grow tenfold to 900 MW in 2018 (IHS). Tremendous growth is also expected of electric vehicles. From 180,000 electric vehicles on the road in 2012, annual worldwide sales are forecast to reach 3.8 million by 2020 (Navigant Research).

Crucially though, in producing such high volumes of batteries, the aim is to foster economies of scale – whereby manufacturing in higher quantities preludes reduced costs, which in turn acts an economic force driving the growth of markets requiring those components.

We see this happening already with PV components. Indeed, SolarCity are actively contributing to economies of scale is this domain: investing in PV production plants of their own, including one in New York State about the size of the largest one in Asia. SolarCity CEO Rive says he plans to follow up with factories ten times as large. Rive notes that at such scales, assuming solar cell efficiencies continue to steadily rise, the cost for installed solar panel systems would be cut by about half, from $2.30 per watt to $1.20.

The Gigafactory will be manufacturing batteries from base materials up to the point at which they’re ready for installation into vehicles or as stationary storage. That means producing cells that make up modules, and turning modules into battery packs suited to needs of Tesla vehicles, SolarCity energy systems, and beyond.

Traditionally, battery manufacture is a distributed operation – with multiple factories producing components. By bringing everything under one roof, Tesla intend to streamline the process, and stand to reduce battery costs considerably. Musk has stated that the Gigafactory will lower costs to less than $100 per kilowatt hour of storage—down from what analysts estimate is about $300 now.

Image rights:

Tesla battery production lines at the Fremont facility fall considerably shy of future needs. Image rights:

Last but not least on the list of reasons for confidence there is Musk himself – a man who’s staked fortunes, sought to disrupt entrenched industries, and pitched himself against the odds before. And won.

Altogether therefore, the hope is that these endeavours will culminate in economies of scale that lower the cost of manufacturing both PV components and energy storage systems in a virtuous cycle that should assure SolarCity and Tesla of growth in their respective markets.

The full extent of this effort remains to be seen however – there are many other aspects to industry that must be addressed to assure success. Nevertheless, battery production is a principle concern, and one that’s being tackled head on with the Gigafactory. Having said that, it’s likely we’re only seeing the opening chapter in construction of mega factories fitted to provide the means for sustainable solutions.

As Musk stated in interview:

You don’t need just one Gigafactory, you need like, two hundred.

 

Resources

Tesla’s Gigafactory factsheet

TED talk – Elon Musk: Revolutionising the Energy Industry

MIT Technology Review –  Solar City and Tesla Hatch a Plan to Lower the Cost of Solar Power

MIT Technology Review –  Does Musk’s Gigafactory Make Sense?

International Energy Association –Understanding the Electric Vehicle Landscape to 2020