Tesla, SolarCity quietly selling building battery projects

By  Apr. 17, 2012, 5:00am PT 16 Comments

Electric car company Tesla and solar roof installer SolarCity have quietly been making deals that could one day lead to dozens of sales of battery projects coupled with rooftop solar systems built at both residential and commercial buildings in California. SolarCity confirmed the energy storage plans with me, and the duo have submitted at least 70 applications for projects to attempt to receive rebates from the California Public UtilityCommission’s Self-Generation Incentive Program (SGIP), which provides incentives for distributed energy generation.

Such a system, which SolarCity and Tesla have been researching over the past two years, would couple Tesla’s lithium ion battery packs with SolarCity’s solar photovoltaic systems. Tesla sources small format (laptop-sized) batteries from Asian battery giants like Panasonic and bundles them together into a pack. The batteries connected to a solar rooftop would be able to store the solar energy for use when, say, a cloudy day reduces the power production of the solar panels. Both solar and wind will need to be coupled with energy storage technology to overcome the problem of intermittency.

Applicants for the SGIP program apply with individual utilities in California, and Tesla and SolarCity have applied for 70 applications under PG&E’s SGIP funds. The other California utilities SCE and SDG&E don’t clearly list out applicants for the program. SolarCity’s Director of Communications, Jonathan Bass, tells me that “each project has a separate application,” which shows that there’s a surprising amount of demand from commercial and residential customers within PG&E’s footprint for a battery system connected to a solar roof system. The SGIP program decided to include stand alone energy storage tech last year.

However, before these projects will move forward, SolarCity and Tesla are waiting on confirmation that they will get the rebates and they have not yet received these confirmations, says SolarCity’s Bass. The SGIP program briefly opened for applications in November 2011, and then more recently reopened for applications with limited funds available.

Tesla Roadsters lined up outside of the Model S Beta Customer event

CPUC Information Officer Andrew Kotch told me that the CPUC is “very pleased by the amount of storage activity in the program, as this emerging technology has a great amount of potential to contribute towards California’s climate and energy goals.” Kotch says the CPUC is “encouraged that the modifications the CPUC made to SGIP are resulting in more distributed storage applications. Specifically, the decision by the CPUC allows for storage systems to be coupled with existing PV systems, which is what the majority of the SolarCity/Tesla applications are.”

Kotch also said in an email to me that the SolarCity and Tesla projects have received “a conditional reservation from the utility program administrators,” which means that they’ll be paid the full incentive if/when they are completed according to the specifications given to the utility.  “The projects will be funded as soon as they are complete and operational. They have a maximum of 18 months to reach completion, though it is likely many will be finished in less time,” said Kotch.

Economics of energy storage

This isn’t the first time it’s been reported that SolarCity and Tesla have been working on this tech. And actually the duo received $1.8 million from the CPUC two years ago to conduct research around how such an energy storage system would work. Back then the New York Times reported that there would be six homes that would get the battery systems for research purposes. SolarCity shows the energy storage box, with Tesla’s logo on it,on its website.

But this is the first time I’ve heard how far the project has gone in terms of commercialization. IDC Energy Insights analyst Sam Jaffe told me that if SolarCity and Tesla manage to bring these energy storage projects to fruition and gain widespread commercial interest, it could be a breakthrough in terms of using subsidies to get the economics for building energy storage low enough to be attractive to customers. The problem with using batteries for residential and commercial energy storage to date has been that it’s been way too expensive, said Jaffe.

If these systems are using both the SGIP subsidies and the federal investment tax credit (ITC) for clean power, then that would provide for more than half of the incentive for the energy storage system, said Jaffe. Lithium ion battery energy storage systems are generally one of the more expensive forms of energy storage.

There’s another connection between Tesla and SolarCity, too. Elon Musk is the Chairman of and an investor in SolarCity, and the co-founder and CEO of Tesla. SolarCity co-founder and CEO Lydon Rive, and SolarCity co-founder and COO Peter Rive are Musk’s cousins.

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