Tesla's new core business? CES Grid Storage Device For SuperCharger/SuperSwapper

[CapitalistOppressor]

This thread is to specifically discuss the implications of Tesla's new grid storage business, as opposed to debate the particulars of SuperSwapping vs SuperCharging. Elon announced grid storage during the conference call on SuperChargers, so we can be certain that it is a reality.

He did not discuss the business aspect of it, which is our task here. Everyone needs to be clear, the amount of revenue potential for this business probably dwarfs any potential auto manufacturing business. Building electric cars will allow Tesla to bootstrap a capability that will eventually produce mind boggling revenues as the fleet of Tesla's grows into the millions or tens of millions.

Here is the patent that describes the management architecture for Tesla's new Grid Storage Business -

METHOD AND APPARATUS FOR EXTENDING LIFETIME FOR RECHARGEABLE STATIONARY ENERGY STORAGE DEVICES - Patent application

Here is the section linking this patent to SuperSwappers, but this patent is completely agnostic on architecture -

A context for one implementation is use of rechargeable Li-ion battery packs designed for plug-in electric vehicles (PH:EV, HEV, and EV and the like) as community energy storage (CES).

Read more: METHOD AND APPARATUS FOR EXTENDING LIFETIME FOR RECHARGEABLE STATIONARY ENERGY STORAGE DEVICES - Patent application

The words "Metal-Air" are also in the patent. Any mention of that is off topic. This thread is about the business of grid storage. Same goes for SuperSwappers/SuperChargers or any other car related architecture.

Battery chemistry is relevant in terms of capacity, rechargability and life-cycle.

Here are background resources for competing uses, whether to support SuperChargers or SuperSwappers. The grid storage business is the same regardless -

Randy Carlson's post on the economics of how grid storage can make buckets of money for Tesla in the context of SuperChargers -

SuperCharging Tesla - Seeking Alpha

I've posted quickie models describing roughly the same thing at threads all over TMC, only in the context of SuperSwappers. I'm not going to link to all of them, but the best stuff is probably in the speculation thread on what the mystery announcement was (posted before we found the reference to swapping in the 8k) with my first post here, and discussion continuing forward until after the 8k was discovered -

Swapping is a huge investment and part of the reason I knew Better Place was going to fail. I hope that's not what Elon is talking about.

I dunno about that. My reason for thinking Better Place was going to fail was the terrible cars they were offering along with how much they were shafting the consumer with their shady battery lease. If you looked at the car, and did the math it was just an incredibly bad deal all the way around.

In contrast, I did do some work on modeling a Model S battery swap program, modeling it on "In-Bay Automated Car Wash" systems like you see at a typical gas station. The capital costs weren't that bad, and you only need maybe 1,000 batteries to supply 100 stations. The biggest ongoing cost is you need a small fleet of trucks to constantly rebalance the battery inventory, and workers to do the balancing.

I even have toyed with patenting some of the mechano-logistical elements of the model I came up with. If Tesla is actively considering this I'd suggest they call me and see if any of my thoughts are of value to them.

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Man, you guys have all hyped this up to unbelievable levels such that any real announcement will seem like a disappointment.

It is sure to be some cool feature or other, but nothing on the order battery swapping or exotic new batteries!

Yes, I pretty much agree, but Elon is making it hard not to dream with the tweets he is sending out.

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Assuming it is battery swaps (which I'm pretty convinced of at this point), it seems like one of the bigger questions is how it interacts with the supercharger network.

From the 10K, one of the risks to acceptance they list is:

"our capability to rapidly swap out the Model S battery pack and the development of specialized public facilities
to perform such swapping, which do not currently exist but which we may introduce sometime in 2013;"

And from another section:

"In addition, we designed Model S to incorporate a modular battery pack in the floor of the vehicle, enabling it to be rapidly
swapped out at certain of our service centers and specialized commercial battery exchange facilities that we anticipate may be available in the
future. "

So, sounds like they're introducing the facilities, including some at existing service centers. The use of the word "commercial" makes me think that the swaps won't be free like the supercharges. Maybe they're setting up superchargers as the baseline for shorter weekend trips and swaps as the premium solution for really hauling cross-country?

I feel like I'm going a bit beyond what the evidence shows, but what's the point of a forum if not speculation?

No, that was my assumption when I looked at this last year. Tesla will clearly charge for battery swap.

I then went on to describe more in detail how this would work further up the thread.

This concept then was discussed extensively in Citizen-T's thread, which was started after the reference in the 8k was found, where the architecture of the system was then debated -

Battery swapping is coming. There is little doubt at this point that part 5 of Elon's trilogy is battery swapping.

Now, I know there are a number of threads that are discussing this, and debating the pros and cons of swapping, and arguing about whether or not it is a good idea. The fact of the matter is, none of that matters. Apparently they have found a way to make it work. So, I don't want to rehash any of those old arguments in this thread. I want to figure out what Elon and company know. If he found a way to make this work, then there is no reason we can't figure it out too. Let's do what we do best and scoop his announcement.

Let's start with what we know about Elon's strategy for dealing with these things. It seems to me that the way Elon attacks a problem is that he first studies the opposing arguments. He compiles them all together, then he ranks them and begins knocking out each leg of the argument one at a time. That's what this 5-part trilogy is all about after all: he's taking the bear case against Tesla and attacking each point one at a time.

So, let's do the same. Let's compile together the list of arguments against battery swapping, then let's figure out what Tesla could be doing to "solve" these problems.

This is what I've got to start. Let me know if I should add anything.

• Swapping is too expensive
• They need to have a ton of batteries on hand (to be able to handle the worst case) but most of the time they are sitting around doing nothing.
• Why would they bother building out the Supercharger network if they are going to do swapping too?
• I take really good care of my battery, I don't want to end up with someone else's random battery.
• Swapping stations are too mechanically complex, would be a pain to maintain.

So, let's compile some potential answers to each of these arguments. Again, it doesn't matter whether you agree with these arguments or not, it only matters that some do. If anyone believes these things, they are an argument worth squashing in Elon's book (think about the bricked battery thing).

The Answer (a work in progress)

The Tesla Battery Swapping Network will be a subset of the Supercharger Network. This means that all battery swap stations will also be supercharging stations, but not all supercharging stations will be battery swap stations. The highest traffic supercharger stations will be selected for upgrade to battery swap stations to reduce the amount of time the average person needs to wait.

The stations will only have a limited number of batteries. Owners will be able to reserve a battery for up to 30 mins before their arrival at the station via their smartphone app or the center console in their Model S. This balances the desire of the owner to know ahead of time how long they will need to stop for with the station's goal to not have reserved batteries sitting idle when other owners could be using them. This also gives the station enough time to Supercharge a battery for the owner and have it ready just in time for the owner to swap.

If an owner is unable to reserve a battery, then they will need to use the superchargers that are available at the station. This should only occur when traveling at peak times and only for a minority of owners visiting the station.

There will be a per-use cost for battery swapping. This helps to offset the cost of maintenance on the stations, but more importantly, creates an economic incentive for owners to use the free Superchargers if they are planning on stopping for a while anyway. Tesla is trying to avoid having owners swap their battery, then immediately park to go use the restroom and grab a bite to eat. The Supercharger would have worked just fine for their use case, and a small fee is probably enough to make them behave in the way that we want.

Tesla already has the cheapest battery packs around, and by increasing their production of packs for these stations, they'll get even greater price reductions for the cells that they purchase for the packs (and other economies of scale). Furthermore, once they demonstrate the ability to battery swap, the Model S becomes eligible for even more ZEV credits per car. The added revenue from selling these credits also helps to offset the cost to build these stations. Finally, batteries at the station will not be sitting idle. They will store energy collected by the onsite solar arrays or the grid during times of low use and then they'll be drawn from for Supercharging (assuming they have not been reserved by an incoming owner). This will help reduce the operating cost of the superchargers.

Because Tesla warranties all batteries against anything at all (except intentional tampering) there is no reason to be concerned about what battery you end up with in your car. You can feel perfectly confident that your battery will perform and Tesla will take care of it if it doesn't.​

Alright. That's what I've got so far. Please contribute your own ideas or rip into mine. I'll update this story to reflect what I think are the best ideas emerging from the discussion.

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Fearless prediction. Tesla will finance these the same way that Solar City does with Solar Power installations. CDO's.

 

[adiggs]

The immediate thought I had when I first read this idea about grid level storage as a business - clearly the car battery packs, at 85kw each, are getting ganged together in astounding numbers to eventually have enough extra packs to actually do this. I don't know where the cost would need to be to make this work, but it seems to me that the cost for the packs would need to be a lot lower than we've been thinking its actually at right now, to make that feasible.

The basic business model is conceptually sensible to me - buy electricity when its cheap, sell electricity when its not. Grid providers are happy - with enough grid level storage, they can decrease or even start dismantling the generators that sit about waiting for peaks in demand, and operating the base load generators more consistently. You also have somewhere for the wind and solar power to go when their generation peaks.

At the level of a single pack, if this electricity arbitrage is worth $0.10 per kwh (say buy at $0.05, sell at $0.15), and if you move 50 kWh/day, then the pack is earning $5/day. That's around $1800/year. If the pack costs $400/kWh to manufacture (I've seen that number somewhere before), then you're into the $32k range. You need closer to 20 years to break even and that doesn't seem all that good. But if the packs cost more like $100/kWh to manufacture, then you're down to about 5 years to pay for the pack - that sounds really desirable.


I really don't know what to make of this, but if Tesla has figured out how to do production levels of grid level storage and make it pay, they can build the grid storage company themselves, or they can sell the packs to others to implement grid storage; either way, they're going to need a bigger battery pack manufacturing plant

 

[Cattledog]

Perhaps we've already seen the battery swap business model foreshadowed in the loaner car program - if you like the loaner car better, keep it and pay the difference with an equation based on age and mileage. Why couldn't the same be accomplished with the battery? When you come to swap, they'll assess age and charge cycles and then give you a price for the swap. OK, seems a little messy, but it gets around the variability of battery pack quality when swapping.

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The immediate thought I had when I first read this idea about grid level storage as a business - clearly the car battery packs, at 85kw each, are getting ganged together in astounding numbers to eventually have enough extra packs to actually do this. I don't know where the cost would need to be to make this work, but it seems to me that the cost for the packs would need to be a lot lower than we've been thinking its actually at right now, to make that feasible.

The basic business model is conceptually sensible to me - buy electricity when its cheap, sell electricity when its not. Grid providers are happy - with enough grid level storage, they can decrease or even start dismantling the generators that sit about waiting for peaks in demand, and operating the base load generators more consistently. You also have somewhere for the wind and solar power to go when their generation peaks.

At the level of a single pack, if this electricity arbitrage is worth $0.10 per kwh (say buy at $0.05, sell at $0.15), and if you move 50 kWh/day, then the pack is earning $5/day. That's around $1800/year. If the pack costs $400/kWh to manufacture (I've seen that number somewhere before), then you're into the $32k range. You need closer to 20 years to break even and that doesn't seem all that good. But if the packs cost more like $100/kWh to manufacture, then you're down to about 5 years to pay for the pack - that sounds really desirable.


I really don't know what to make of this, but if Tesla has figured out how to do production levels of grid level storage and make it pay, they can build the grid storage company themselves, or they can sell the packs to others to implement grid storage; either way, they're going to need a bigger battery pack manufacturing plant

Perhaps his is part of a strategy to reduce pack costs through dramatic increase in production numbers - if the pack storage can at least break even in the short term while being a grid storage device, and their costs start to reduce by volume production, the gross margins on the car increase (it's the most expensive component of the car) and Gen3 starts to look more feasible without a battery breakthrough, simply with continued improvements.

 

[deonb]

Woo-hoo! Just in time.

I translated some parts of the SuperCharger announcement, that afterwards decided that it wasn't pertinent enough to my June 20th list. But they certainly belong here.

Elon, Supercharger Announcement, May 29 on Partnering:
Conceivably if we were to do a partnership with a major manufacturer that were interested in the SuperCharging system and are willing to use the same basic architecture, then it could be used by more than just Tesla. We're not closed to that idea. We're not trying to create some closed system as some sort of strategy or something like that. It's just that we need to solve the problem of long distance travel and we can't wait for others to agree with our strategy. If we wait for some sort of concensus, it's going to take too long. So we just need to keep going and then other manufacturers can either copy us or join us.
http://ir.teslamotors.com/releasedet...leaseID=767983
https://www.dropbox.com/sh/yozowduql4vggzq/rDQXdo7Hqm 38:30

Elon, Supercharger Announcement, May 29 on Solar Panels:
Q: Can you explain how the Solar works for the stations that do have solar?
The general principle is that we want to generate more energy from the sun over the cause of the year than is used by Model S's that
recharge at the station. The recharing tends to be concentrated during pretty obvious times, like on a Friday afternoon and evening and on
a Sunday afternoon and evening, cause people are going somewhere for the weekend or on holidays days - that kind of thing. Whereas it sees
relatively low usage during the week. The solar panels are generating energy throughout the course of the week, and it cummulatively adds
up to more than the energy that the car consumes.

And I was thinking of saving this bit of information for a future announcement, but you do make a good point, we've kind'a had too much
news. So I'll just pack it in here, which is that we actually have grid storage going on at sort'a our SuperCharging stations. So we got
stationary battery packs that take in energy through the week from the Solar Panels and - the Solar Panels actually charge the battery
pack and then that stationary battery pack charges Model S's, and so it's actually capable of going completely off grid. And this is
something we expect to probably roll out to all the SuperCharging stations, and I think it's something that's sort'a fairly cool. These
stations will then operate even if the entire national grid goes down.
http://ir.teslamotors.com/releasedet...leaseID=767983
https://www.dropbox.com/sh/yozowduql4vggzq/rDQXdo7Hqm 21:09

Q: So how many of the Grid Storage units do you have out there, and how big are they?
We've got 2 in operation right now. They are pretty sizable. Half a Megawatt Hour, and they're capable of putting out a Megawatt if need be.
Q: Where are they located?
Actually, I'd rather not say where they are located, because I'd rather not have people go and fudging around with them. I'll tell you they're in California - there's probably only a limited number of stations. And we're actually doing this in partnership with the utlities, btw, so. The grid storage is considered a helpful thing to the utilities cause it allows them to use that pack as a grid buffer. The utilities always have a challenge of dealing with too much or too little power generation at a time, so we're able to provide that buffering capability which they like.
http://ir.teslamotors.com/releasedet...leaseID=767983
https://www.dropbox.com/sh/yozowduql4vggzq/rDQXdo7Hqm 40:45

 

[CapitalistOppressor]

The immediate thought I had when I first read this idea about grid level storage as a business - clearly the car battery packs, at 85kw each, are getting ganged together in astounding numbers to eventually have enough extra packs to actually do this. I don't know where the cost would need to be to make this work, but it seems to me that the cost for the packs would need to be a lot lower than we've been thinking its actually at right now, to make that feasible.

The basic business model is conceptually sensible to me - buy electricity when its cheap, sell electricity when its not. Grid providers are happy - with enough grid level storage, they can decrease or even start dismantling the generators that sit about waiting for peaks in demand, and operating the base load generators more consistently. You also have somewhere for the wind and solar power to go when their generation peaks.

At the level of a single pack, if this electricity arbitrage is worth $0.10 per kwh (say buy at $0.05, sell at $0.15), and if you move 50 kWh/day, then the pack is earning $5/day. That's around $1800/year. If the pack costs $400/kWh to manufacture (I've seen that number somewhere before), then you're into the $32k range. You need closer to 20 years to break even and that doesn't seem all that good. But if the packs cost more like $100/kWh to manufacture, then you're down to about 5 years to pay for the pack - that sounds really desirable.


I really don't know what to make of this, but if Tesla has figured out how to do production levels of grid level storage and make it pay, they can build the grid storage company themselves, or they can sell the packs to others to implement grid storage; either way, they're going to need a bigger battery pack manufacturing plant

The packs are very much cheaper than people think. Look at the battery Ip thread I just posted to get a partial sense of why. As to actual prices I'll be posting my estimates next week.

The $400/kWh price comes from the $10k difference in the price of the 85kWh and 60kWh packs, which works out to $400/kWh ($10k/25kWh). That is so much cheaper than anyone else in the industry can build these packs that everyone takes it at face value. It's off by a lot.

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Woo-hoo! Just in time.

I translated some parts of the SuperCharger announcement, that afterwards decided that it wasn't pertinent enough to my June 20th list. But they certainly belong here.

They do belong in the June 20th thread. The June 20th announcement is about SuperSwapping, which is how grid storage is going to be practically implemented at the moment. (See, I broke my own rule. Do as I say, not as I do :smile

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Just to clarify the $10k price difference is the difference in the price of the cars not the price of the packs. ~$70k for the 60kWh car and ~$80k for the 85kWh car. For the $10k you get free supercharger + additional performance and range. So it was always just a loose way to calculate the underlying pack costs.

 

[emupilot]

Grid storage is actually an excellent use for battery packs at the end of their automotive life. A 25% reduction in capacity will probably be enough to get a Model S owner to buy a new pack. Tesla gets to use the 75% remaining capacity of the old pack for grid storage. This residual value of old packs might also explain why Tesla has offered replacement battery packs for $12,000.

 

[Thumper]

This all requires a daunting bit of hardware. Remember that that Megawatt of storage needs thermal management. Maybe they bury the batteries.

 

[deonb]

They do belong in the June 20th thread. The June 20th announcement is about SuperSwapping, which is how grid storage is going to be practically implemented at the moment. (See, I broke my own rule. Do as I say, not as I do :smile

Ok, you convinced me. I changed the "Prevailing Theory" to be SuperSwapper + Grid, and added the grid elements:
http://www.teslamotorsclub.com/showthread.php/17460-List-of-all-June-20th-announcement-hints

 

[callmesam]

C.O.

I think that Randy's article was a good jumping off place.

Superchargers are free to Tesla and to drivers for several important reasons:
1. Solar power fed into the grid for $0.30/kWh
2. Battery grid buffer. Tesla is selling their ability to back the grid during peak use so that the grid doesn't have to buy "peaker" power $0.15/kWh available
3. Time of Use. Tesla can "sell" power all day via solar and battery, and can charge back in the evening and "buy" for $0.05/kWh
Will all of the above generating revenue for Solar City, the Superchargers are going to be break-even OR make money for Tesla.

The value of the battery grid buffer will likely increase since peaker power is so expensive.

 

[deonb]

Tesla just updated teslamotors.com to now have the SuperCharger first and formestly featured. (I think this happened within the last 2 hours). Model S is now in the background.

I think you're right on the new core business.

Wow. My GM-like investment just became an XOM-like investment.

 

[jeff_adams]

Does anyone else find it coincidental that Elon said there are two grid sites and Tesla happens to have two obelisks? Those black bases look awful big to me. Are they the right shape and size to contain battery packs?

 

[dsm363]

Does anyone else find it coincidental that Elon said there are two grid sites and Tesla happens to have two obelisks? Those black bases look awful big to me. Are they the right shape and size to contain battery packs?

I was thinking the same thing. Looks like it is big enough for 4 packs (2x2 base) but stacked up a few layers. Maybe 32 or so 85 kWh packs?

 

[RDoc]

I was thinking the same thing. Looks like it is big enough for 4 packs (2x2 base) but stacked up a few layers. Maybe 32 or so 85 kWh packs?

They're going to have to have some pretty serious cooling equipment as well I'd think.

 

[mitch672]

They're going to have to have some pretty serious cooling equipment as well I'd think.

Why? The packs are liquid cooled, so all they need is to build a larger version of the chilling system in the Model S, and that's only when being charged or discharged at a high rate of current. If you read Randy Carlson "SuperCharging Tesla" article, he actually has pictures of the name plate data on the Inverters, I think he even mentions which site in CA it's at.. He has a nice diagram of it he drew as well.

The rate arbritrage and grid stabilization are only part of the strategy, also remember one function is to keep the demand charges down from the grid during multiple SuperCharger sessions. Teslas "end game" is, as Randy points out, in getting a one-time licensing fee from other manufacturers for lifetime SuperCharger access to EVs they make. Tesla will generate large amounts of revenue from this, but that's much further down the road, maybe 7-10 years. Elon is smart, this allows to you multiply your income without building a lot more cars. License your drivetrain, pack technology and SuperCharger access to major manufactures who can crank out millions of EVs per year.. This is Elons secret plan to monetize the replacement of the ICE, without requiring tremendous expansion of manufacturing facilities - prove it can be done, and collect licensing fees while others build the cars.

 

[jeff_adams]

I would think that Tesla would be providing batteries to Solar City and they would be the ones "running the grid" with panels, maintenance, selling and buying of power, ect. This would be a great package to sell to hospitals, police departments, hotels, ect. Anyone who wants constant power without worrying about a power outage and doesn't want the expensive of dealing with auxiliary diesel generators.

 

[brianstorms]

It's too bad that the Energy Storage Association's annual conference just happened -- last week! In Tesla's back yard (Santa Clara, CA). Despite the fact that they were not speakers on the program, I'm sure there were folks from Tesla all over this event.

Conferences such as these are fantastic places to learn what's going on before it gets announced.

This would have been a great place to run the ideas presented in this thread by random attendees, who happen to be the very professionals working to create the kind of smart grid that the Tesla system would thrive in, and get their opinions.

I wonder if they have a message board or mailing list . . .

 

[FredTMC]

Does anyone else find it coincidental that Elon said there are two grid sites and Tesla happens to have two obelisks? Those black bases look awful big to me. Are they the right shape and size to contain battery packs?

Wheres the other obelisk? This one's at Hawthorne.

Thx in advance

 

[Causalien]

So, I saw a pictire of a super,charger station. It has a pool. I was wondering why you need a pool? Can that be used to cool the batteries? like evaporative cooling. Now that the batteries are not stuck on a car. A sorts of liquid cooling are possible. Maybe even opening the pool as a heated pool for families when they take a break.

 

[jeff_adams]

Wheres the other obelisk? This one's at Hawthorne.

Thx in advance

I think it's at the Freemont factory. That would make the most sense. If a power outage were to occur, they would want to keep Space X and NUMMI up and running. Do they have solar panels in Freemont? I know they have not put them on the roof

 

[30seconds]

I think it's at the Freemont factory. That would make the most sense. If a power outage were to occur, they would want to keep Space X and NUMMI up and running. Do they have solar panels in Freemont? I know they have not put them on the roof

Wasnt there a pic on the solarcity site showing a tesla battery box attached?