A better battery to come?

Photographer: Ian Thomas Jansen-Lonnquist/Bloomberg

Musk's Solar Lifestyle Idea Has One Big Flaw

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Tesla’s explanation of its proposal to acquire Solar City, another Elon Musk project, offers a compelling vision: Get energy from the sun, use and store it in the home, charge your car with it. “The world’s only vertically integrated energy company offering end-to-end clean energy products to our customers” will, however, be a very expensive doughnut with an assumption in the middle.

QuickTake Batteries

The commercial success of Musk’s vertical integration idea hinges -- in terms of turning a profit rather than generating a high market capitalization -- on battery technology that would have mass rather than niche appeal. The assumption upon which Musk’s concept -- and Tesla’s $32.3 billion market capitalization -- is built is that Tesla is betting on the right battery technology and no one will come up with a much better one. That is the big hole in the doughnut: The assumption is far from safe.

Cheap and reliable energy storage is central to the idea of an off-the-grid, solar-powered household. Such a home needs energy at night, when the sun isn’t shining: It has fridges, air conditioners and other appliances running, and a Tesla charging in the garage. So it needs a good battery, and Tesla’s Powerwall doesn’t necessarily fit the bill -- if only because the cost of the energy it supplies, including amortization, is higher than grid prices. Because of this, and given the high price of Tesla cars, the lifestyle on offer is an expensive statement. In terms of cost and convenience, it’s not competitive with the traditional grid-and-fossil-fuel model.

Tesla has killed off the more powerful version of the Powerwall due to low demand, and even Solar City has taken some time to figure out how to make its photovoltaic systems work with the battery. Tesla is putting out a new version of Powerwall this year, but it can only be incrementally better than the previous one: Musk doesn’t appear to believe in any battery technology other than the one that powers Tesla cars -- the old lithium-ion battery with a liquid electrolyte, in use since the early 1990s.

That’s what Tesla's “Gigafactory” in Nevada will be turning out, too, when it comes online. Tesla is working on improving it, by using more and more silicon, rather than graphite, in the lithium-ion cell’s anode to increase the cell’s charge capacity. That is a promising path, but battery tech is such a hot field today that hundreds of teams are working on different approaches to making lighter, cheaper, more capacious batteries -- and one or several of these may turn out to be more promising.

Nissan, Toyota and Volkswagen, to name just three automakers, are also trying to perfect the lithium-ion cell. Nissan’s approach appears to be similar to Tesla’s. It’s not clear whether the company is already using silicon in the batteries for its new Leaf electric vehicle, but it has already announced that the next-generation Leaf will double the distance it can drive on a charge to more than 200 miles, in line with Tesla's range.

Toyota and VW, which in 2014 bought a share in battery tech startup QuantumScape, appear to be working on solid-state technology that would replace the liquid electrolyte with crystal materials. VW has announced plans to build a bigger battery factory than Tesla’s, which suggests it's confident enough in the tech it has. Dyson, the vacuum cleaner manufacturer which last year acquired a battery startup called Shakti3, has promised to deliver solid-state batteries with double the energy density at one-fifth the cost of current technology.

And then there are all the different approaches to battery tech that are regularly touted as breakthroughs that could change the entire field. To name just a few recent ones, there’s an “aluminum-graphite dual-ion battery” developed by a team in China; sodium-ion batteries from the U.K. company Faradion; lithium-air batteries that numerous teams are working to make commercially viable; and a whole range of other exotic technologies

Musk said last year that his company was tracking about 60 different efforts around the world to develop better batteries. “We rate all of them from one to five, where five is we should be doing business with them and one is complete BS,” Musk said, adding that he knew of no “fours” or “fives,” just some “threes.” He expressed confidence that if any disruptive technology emerged, it would be offered to his company.

It’s hard to justify that confidence. Bigger car manufacturers have deeper pockets, and, unlike Tesla, which is using stock to buy Solar City, they are cash-rich. Besides, for a truly disruptive battery tech company, there would be a strong temptation to license its technology to several carmakers or raise money to make the batteries on its own. A small firm -- like Spain’s Graphenano, for example -- could emerge as the owner of the intellectual property that allows for cheap energy storage and fast charging, and it might prefer to own the market while it can rather than work with Tesla the way its current battery partner, Panasonic, does.

A breakthrough, of course, is not guaranteed. It’s more likely that, for the next few years at least, similar technology will be available to several companies. Nissan is catching up to Tesla-Panasonic on electric vehicle batteries, and German-based Sonnenbatterie already sells a home battery that successfully competes with the Powerwall. In this situation, Tesla is not the clear favorite -- it has limited experience producing anything at scale and lacks the big cash inflows of its rivals.

Musk has demonstrated a remarkable business intuition and made some bold bets that have paid off so far. Yet the entire structure he has built around clean energy is, essentially, a gamble, albeit an inspiring one.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor responsible for this story:
Therese Raphael at traphael4@bloomberg.net