Gigaboom: Obama Adds One More Reason to Like Tesla's Battery Factories

Tesla Factory
Inside Tesla's car body factory on June 5, 2012. Photographer: Tesla Motors Events

The world is on the brink of a serious surge in batteries -- and not just the kind that powers mobile phones, laptops and sports cars. Batteries of the near future will power homes and hospitals and even provide relief for the grid, with in an industry that may be worth $200 billion in 2020.

The battery boom got an extra boost from the Environmental Protection Agency, with new regulations proposed this month to limit power-plant pollution. In a departure from previous rules, the EPA leaves it to individual states to determine how they will cut emissions. Some states will build more efficient buildings, others will shift from coal to cleaner-burning natural gas. An often-overlooked beneficiary is battery makers.

You might be forgiven if you missed the connection, but it’s right there in the EPA filing, on page 507 (out of 645):

“Electricity storage technologies have the potential to enhance emission performance by reducing the need for fossil fuel-fired EGUs [Electric Utility Generating Unit] to provide generation during periods when intermittent wind and solar generation are unavailable due to natural conditions. States may wish to consider this possibility as they consider options for design of their plans.”

Translation: as solar panels and wind turbines become more attractive, batteries can store power for when the sun isn’t shining and the wind doesn’t blow. Renewables will account for about 70 percent of new generation capacity added worldwide from 2012 to 2030, according to Bloomberg New Energy Finance.

The chart below shows the trajectory of the global lithium-ion battery market. From 2010 to 2013, battery production measured in gigawatt hours increased by more than half. That's nothing, if Elon Musk has anything to say about it. His proposed U.S. battery “gigafactory," shown in red, aims to produce as much battery power in the 2020 as the entire global marketplace makes today.

Planned 2020 gigafactory production Exceeds 2013 global production. Source: Tesla and IIT Takeshita 2013
Planned 2020 gigafactory production Exceeds 2013 global production. Source: Tesla and IIT Takeshita 2013

Batteries currently make up a small fraction of the total market for power storage. About 95 percent of the world's 25 gigawatts of stored energy is in the form of pumped hydro. That's a system where off-peak electricity is used to pump water uphill to a storage reservoir, where it can later be released downhill to produce energy to meet peak demand (pictures here).

Pumped hydro works well, but only for large-scale producers in areas with plenty of reservoir space, like West Virginia's Bath County station, the world's biggest. However, batteries are gaining ground as prices fall and as demand for small, portable solutions increases. Batteries are the fastest-growing storage business, accounting for 53 out of 57 projects currently under construction in the U.S., according to Bloomberg Industries analyst James Evans.

“The Gigafactory would open up battery storage packs not just for electric vehicles but also for power storage more generally," Evans said by phone. "The EPA rules are designed for the states to reduce their carbon emissions, and they can do that however they see fit. Energy storage is going to be one of the many tools states could potentially use to get there."

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