2017 Investor Roundtable:General Discussion

[Jonathan Hewitt]

The South Australia deal is looking very likely. Between the billionaire Mike Cannon-Brookes arranging financing and now the Premier of SA Jay Weatherill looking into it I think the chance of the project being attempted is looking really good. Worst case it's good publicity. It's the #1 tech story on CNBC right now and on the front page as one of the top stories.

 

[jbcarioca]

The South Australia deal is looking very likely. Between the billionaire Mike Cannon-Brookes arranging financing and now the Premier of SA Jay Weatherill looking into it I think the chance of the project being attempted is looking really good. Worst case it's good publicity. It's the #1 tech story on CNBC right now and on the front page as one of the top stories.
View attachment 217912
View attachment 217914

Of all the recent moves by Pacific islands and California pubic utilities, among others, The SA deal probably will be one of the most influential ones for Tesla Energy, if it happens. Several other suppliers are in the sector, but Tesla may have the singular advantage of rush deployment of turnkey solutions, if they can actually deliver. This is one are in which Tesla must deliver one time, on specifications, without glitches. It's time for a Tesla Energy sub-forum! We have one, it should now house these subjects.

 

[techmaven]

e

Not clear what this includes... just the PowerPack, or PowerPack solution which includes inverters and interconnects? We shall see soon. The demand level obviously skyrockets as the price drops. And as volumes increase, the fixed costs also become a smaller part of the COGS. Typically, NMC cells cost more than the NCA ones, but not clear if that is because of form factor. NMC is supposed to cost less on a raw materials basis, but uses a lot more cobalt. Not clear how that was supposed to work out from the various research papers.

Anyways, I wrote earlier, $500/kWh was from Lyndon Rive's comments. Clearly, from 2014, Tesla was always aiming the PowerPack at $250/kWh. What isn't clear is pack cost versus system cost and when they kick in Gigafactory cost savings into the pricing structure. A move to open pricing and terms likely means that Tesla is confident on their ramp and cost structure.

Also, thinking back to the original comments Musk and JB Straubel made on the PowerPack, they expect a design life of 12-15 years. That's 4,380 to 5,475 cycles. Warranty is for 10 years, with extended warranties available. The issue is the resulting pack degradation at that point. Typically, stationary storage is given cycle life with much lower end capacity remaining than given with automotive. Hence the sometimes wildly high cycle life claims. A 5,000 cycle life to 80% capacity is reasonable given Tesla's history. Assuming a systems cost including installation and shipping of $350/kWh at this scale... that's about $0.08/kWh with degradation. That compares very well with peaker plant costs.

 

[sundaymorning]

The South Australia deal is looking very likely. Between the billionaire Mike Cannon-Brookes arranging financing and now the Premier of SA Jay Weatherill looking into it I think the chance of the project being attempted is looking really good. Worst case it's good publicity. It's the #1 tech story on CNBC right now and on the front page as one of the top stories.
View attachment 217912
View attachment 217914

In less than one week since Adam J published "zero" value to TE, it's already getting harder for MS to justify that nonsense of a valuation. Elon isn't just "hooking up" businesses to go sustainable, his company is now the "unofficial" ambassador to clean air for governments around the world.

 

[techmaven]

In less than one week since Adam J published "zero" value to TE, it's already getting harder for MS to justify that nonsense of a valuation. Elon isn't just "hooking up" businesses to go sustainable, his company is now the "unofficial" ambassador to clean air for governments around the world.

Likely investors want to see solid positive margins, not just increasing volume. Remember, Tesla has been pushing this segment since 2014 and hasn't had much to show for it. AJ's basically goading Tesla to either show the results or be more firm on the expectations on volumes and margins. Of course, this is the year of transition where this segment becomes something substantial. And the SP will reflect that sentiment well before the analyst's price targets will reflect it...

We know that Tesla's automotive packs are at a COGS of less than $190/kWh, but that doesn't include the inverter and other costs with the PowerPack. Plus, it reflects pricing where the volume is 8+ GWh/year. The stationary storage side had volumes under 500 MWh up until now, so naturally margins are much poorer. Since the two share much of the same architecture, it is not unreasonable to expect that the stationary storage to eventually achieve the same COGS or maybe even better. And that pricing was before Gigafactory cell manufacturing, so we should be expecting COGS closer to $150/kWh for the battery packs alone. So after this startup period is over, the margins for stationary storage will go from terrible to possibly higher than automotive while the competition can't achieve the same pricing levels.

 

[MitchJi]

Elon Musk has offered to fix this region’s energy problems for free
Arjun Kharpal | @ArjunKharpal
4 Hours Ago
Billionaire Elon Musk has offered to fix South Australia's energy issues within 100 days, claiming that he would do it for free if he failed to meet the deadline.

The offer comes after several blackouts due to storms in the Australian state that have caused price spikes, with local energy firms struggling to meet demand following damage to infrastructure.

SolarCity is an energy company that Musk founded with his cousin Lyndon Rive. The company merged with Tesla, the car company which Musk is the CEO of. SolarCity makes solar solutions for areas which can store up energy during the day and feed that back into an area's grid.

Rive told Australian news site AFR that the company could install the 100 to 300 megawatt per hour of battery storage that South Australia requires to stop power shortages and blackouts. Rive added that this could be achieved within 100 days.

Surprised at the comments, Mike Cannon-Brookes, the Australian founder of
Nasdaq-listed tech firm Atlassian, which is worth over $6.3 billion, asked Musk on Twitter if he was serious, to which the Tesla boss replied that he was.

Sarah Hanson-Young, a senator for South Australia for the Greens party, then reached out to Musk asking to talk.

Rive said that the required energy would be ready if the region needed it.

"We don't have 300MWh sitting there ready to go but I'll make sure there are," he told the AFR, adding that there has been increased production at the firm's Gigafactory in Nevada.

Cannon-Brookes asked Musk to give him seven days to sort out "politics and funding" then requested a price quote. Musk replied saying that it would cost $250 per kWh for 100MWh-plus systems, adding that additional fees like shipping, tariffs and installation would vary by country and are "beyond our control".

 

[Irishjugg]

Strictly speaking, Pruitt is right. We don't know enough about natural warming and cooling cycles to know whether CO2 is the primary contributor to the 0.8C rise in global temperatures since 1880. Most likely, it is. But there is a small chance that a natural warming cycle has been the primary contributor, and our emissions are a very large secondary contributor (say, 49%). Not very likely, but possible.

Of course, it's also possible that our emissions have caused more than 100% of the observed global warming. If we are in a natural cooling cycle, our emissions may have caused more warming (say, 1.0C or even 1.5C), but nature negated some of it. In that case, we're causing global warming at a faster rate than we are capable of observing.

At any rate, Pruitt's nit-picky, lawyerly point should not be the basis for policy.

This isn't really accurate. If you mean we don't have 100% certainty then you are technically correct, but really is we are on the same order of certainty as we are about gravity or about cigarettes being bad for you.

Unless the Earth is entering a warning cycle entirely unseen in nearly 1 billion years, the amount that the Earth's cycles is contributing is extremely small both in general and relative to human and CO2 causes. There are enormous amounts of peer reviewed research you can feel free to view as my sources on this.

 

[Bgarret]

This is brilliant. It is the #1 Story on Twitter and Australians are laughing at their government - Musk looks like Tony Stark once again, you can almost see him putting on the shiny metal suit and flying the Powerpacks over to Australia himself. In the twitter comments various people chime in on Cypress, India, Africa..."Elon Musk, fix our grid".

Q. What is the marketing budget for Tesla?
A. What is the cost of Elon's phone?

 

[MitchJi]

I hear ya. BUT, with history as a guide, all the previous cap raises occurred within 2 weeks of the ER.

Depends on when they need the money, and what they plan to announce and reveal between now and April or May (only two months before M3 production might start.)

Ah, more like 4,000+ cycles. And it's $50 million USD per 100 MWh, all in, so $500/kWh is right. It's about $0.11-0.12/kWh factoring in degradation.

Musk said $250 per kWh.

A natural gas power plant doesn't really last 30+ years. *Major* maintenance is required for that, where they replace almost everything. Same thing with batteries - the Mira Loma Powerpack installation may still be operating in 50 years - they just need to replace all the batteries.

The replacement cells will cost much less, not even factoring in the savings from recycling the original cells.

Not clear what this includes... just the PowerPack, or PowerPack solution which includes inverters and interconnects? We shall see soon. The demand level obviously skyrockets as the price drops. And as volumes increase, the fixed costs also become a smaller part of the COGS. Typically, NMC cells cost more than the NCA ones, but not clear if that is because of form factor. NMC is supposed to cost less on a raw materials basis, but uses a lot more cobalt. Not clear how that was supposed to work out from the various research papers.

Elon sounded definitive that all of the hardware required from Tesla is included.

In terms of cell costs a major factor for TE compared to cars is that car packs have a substantially greater energy density, so a kWh of TE requires 15-30% more cells.

I don't believe that research papers are relevant unless they have analyzed the make up of current TE cells.

 

[jhm]

This isn't really accurate. If you mean we don't have 100% certainty then you are technically correct, but really is we are on the same order of certainty as we are about gravity or about cigarettes being bad for you.

Unless the Earth is entering a warning cycle entirely unseen in nearly 1 billion years, the amount that the Earth's cycles is contributing is extremely small both in general and relative to human and CO2 causes. There are enormous amounts of peer reviewed research you can feel free to view as my sources on this.

A man bleeds out with a massive gunshot wound to the chest, but the defense lawyer argues that, because the victim had a history of heart disease, we can't rule out the possibility that he actually was killed by a heart attack just as he was being shot. Natural causes, I say.

 

[jbcarioca]

This is brilliant. It is the #1 Story on Twitter and Australians are laughing at their government - Musk looks like Tony Stark once again, you can almost see him putting on the shiny metal suit and flying the Powerpacks over to Australia himself. In the twitter comments various people chime in on Cypress, India, Africa..."Elon Musk, fix our grid".

Q. What is the marketing budget for Tesla?
A. What is the cost of Elon's phone?

And: how much can Powerwall production be raised?, how quickly?, what does air freight add to costs?

 

[racer26]

So: The way I figure it,

100MWh * (US$250/kWh on 100MWh+ systems) = $25M order, exclusive of shipping, taxes/tariffs, and installation labour.

What do we think the margins are on a PowerPack2 system sold at $250/kWh?

 

[techmaven]

Musk said $250 per kWh.

...

Elon sounded definitive that all of the hardware required from Tesla is included.

Lyndon Rive, yesterday, just said $500/kWh, but I suspect that pricing was the initial quote pricing at the systems level and probably not yet adjusted for what they could do with Gigafactory production.

Tesla battery boss: We can solve SA's power woes in 100 days

He said the cost for large installations had come down to $US400-600 per kilowatt hour of capacity depending on the configuration, or about $US50 million ($A65 million) per 100MWh, with reductions for large scale installations.

PowerPack pricing != PowerPack solution pricing, all in for a buyer to sort out LCOE.

I'm also not sure why Tesla needs to push the pricing down particularly hard... there should be plenty of room between $400/kWh and $250/kWh for Tesla to make good margins with strong demand. At $250/kWh, it's lights out for a number of other technologies though, but in 2017, Tesla doesn't need to get pricing down that far even if they could. Systems pricing below $400/kWh would be fantastic as it stands.

In the followup posting, I used $350/kWh for the system instead to include shipping, installation labor, etc. The cost per kWh will vary depending on the balance of inverters versus capacity.

 

[scaesare]

Is the powerpack spec on cycles out somewhere? Please link to it, so we can verify the 5000-10000 cycles warranty.

Not sure what the warranty is at, but here's Elon's comments in the May '15 Earnings call"

Elon Reeve Musk - Chairman & Chief Executive Officer

Yeah, there is two applications which are quite different, one is backup power or peak up (15:59), sort of the equivalent, the only utility scale is like peaker plant, which is a high-energy application and then there's the daily cycler application. There are different chemistries depending upon which one you have. So the backup power chemistry is quite similar to the car, which is like nickel-cobalt-aluminum-cathode, the daily cycling control constituent is nickel-manganese-cobalt, so there's quite a lot of manganese in there and one is meant for call it, maybe, 60 or 70 cycles per year, and the other one is meant for daily deep cycling, so it's 365 cycles a year.

And the daily cycler one, I mean, we expect it to be able to daily cycle for something on the order of 15 years. Actually the warranty period would be a little bit less than that. But we expect it to be something that's in the kind of 5,000 cycle range capability, whereas the high-energy pack is more like around the maybe depending upon on how it's used anywhere from 1,000 cycles to 1,500 cycles. And they have comparable calendar lives, and for the high energy one, it's important to appreciate that this actually has a lot of interest from utilities because utilities have to maintain these things for peaker plants, and like when there's like a sharp increase in usage.

I've underlined the cell type that would be in place for the utility installation type that would be needed for the SA project.

10-12 year warranty perhaps?

 

[MitchJi]

Cannon-Brookes asked Musk to give him seven days to sort out "politics and funding" then requested a price quote. Musk replied saying that it would cost $250 per kWh for 100MWh-plus systems, adding that additional fees like shipping, tariffs and installation would vary by country and are "beyond our control".

Lyndon Rive, yesterday, just said $500/kWh, but I suspect that pricing was the initial quote pricing at the systems level and probably not yet adjusted for what they could do with Gigafactory.

PowerPack pricing != PowerPack solution pricing, all in for a buyer to sort out LCOE.

I'm also not sure why Tesla needs to push the pricing down particularly hard... there should be plenty of room between $400/kWh and $250/kWh for Tesla to make good margins with strong demand. At $250/kWh, it's lights out for a number of other technologies though, but in 2017, Tesla doesn't need to get pricing down that far even if they could. Systems pricing below $400/kWh would be fantastic as it stands.

In the followup posting, I used $350/kWh for the system instead to include shipping, installation labor, etc. The cost per kWh will vary depending on the balance of inverters versus capacity.

Maybe they are making huge margins at the $250 kWh price! My conclusion based on my analysis is that M3 packs (which might cost quite a bit more than TE packs) will cost under $95 per kWh by the end of 2018.

 

[kenliles]

Strictly speaking, Pruitt is right. We don't know enough....

A man bleeds out with a massive gunshot wound to the chest, but the defense lawyer argues that, because the victim had a history of heart disease, we can't rule out the possibility that he actually was killed by a heart attack just as he was being shot. Natural causes, I say.

Strictly speaking, Quantum physics says Pruitt may not even exist...
So you're telling me there's a Chance...
I'm going with that one

 

[SunCatcher]

Looks like TE may have a value greater than zero after all.

Elon, please save some cells for our Model 3s! Please please please.

 

[dirtyofries]

Jon McNeill replied to all the Tesla service issues - they're adding over 300 3rd party shops to deal with repair delays.

Motley Fool story - Tesla Replacement Part Delays

 

[erthquake]

Jon McNeill replied to all the Tesla service issues - they're adding over 300 3rd party shops to deal with repair delays.

Motley Fool story - Tesla Replacement Part Delays

This is what's so refreshing about Tesla as an automaker. They do try hard to quickly respond to issues like this. It also feels like an initial ramp up in customer service to prepare for the Model 3.

 

[dirtyofries]

This is what's so refreshing about Tesla as an automaker. They do try hard to quickly respond to issues like this. It also feels like an initial ramp up in customer service to prepare for the Model 3.

Agreed - my reading of this is that they've been at it for awhile. It's no small feat to bring on 300 more shops. We all know Tesla service issues aren't a new thing, but it's great to see it has been recognized and dealt with in a rather large fashion.

Also, if all the stats are true, they've made some remarkable progress. That shop really dropped the ball if accurate.