Tesla’s Investor Day: Ramping up the Megapack business 

At the recent Tesla Investor Day at its Austin, Texas Gigafactory, the electric vehicle (EV) and battery storage manufacturer revealed some interesting tidbits about its Megapack energy storage business. Tesla’s energy business was one of the many parts of this three and a half hour long Investor Day on March 1st. Relegated toward the end of the conference, it provided some new insights into the rapidly expanding Megapack business.

Providing the overview was Mike Snyder, senior director, Megapack at Tesla. Snyder has worked at Tesla for nine years, so a little under the ten year track record of Tesla’s large-scale energy storage business. As on the car side of the business, the first ten years have been grueling as Tesla ramped up its Megapack production facilities in the U.S. to meet the increasing demand for its utility-scale stationary storage product. Its Megapack factory in Lathrop, California, is fittingly referred to as the “Megafactory”, though it’s the smaller cousin to the four Gigafactories Tesla runs in Austin, Fremont, Berlin and Shanghai, which together churn out 40,000 EVs per week. 

According to Snyder over 16 GWh of Megapacks have been installed globally so far with the goal being to ramp that up to 100 GWh already this year. He sees 100 GWh as the annual run rate for the next few years, so a big ramp up after just 16 GWh in the initial ten years. The latest product is the sixth generation Megapack XL, packing 3 MWh per unit of the lithium-ion battery. Snyder calls the Megapack XL the stationary battery storage product with the highest energy density on the market, capable of packing up to 300 MWh on a single acre of land. According to Snyder that’s twice the power density of a typical gas peaker plant. 

Snyder was joined on stage by Drew Baglino, Tesla’s senior vice president, Powertrain and Energy Engineering. Both Baglino and Snyder highlighted Tesla’s mastery of power electronics, with the company “delivering more power electronics than the solar and wind industries combined on an annual basis.” The cumulative output so far has been 1.4 TW across Tesla’s vehicle and stationary storage products. Coupled with Tesla’s extensive in-house capabilities in software development, the Megapack can function in “virtual machine mode”, providing synthetic inertia to the electricity grid. According to Baglino, it’s no longer simply a matter of injecting clean energy to the grid, but “adding power stability” to the mix. As Megapack costs continue to decline, these utility-scale energy storage units will replace conventional fossil fuel power plants to provide both energy and stability to power grids. 

As on the car side, Tesla’s ambitions on the Megapack side are impressive: the long-term goal is to boost annual output to 1 TWh, which would represent 25x the annual production capacity of the current factory in Lathrop. Lathrop itself was quite an achievement with Tesla transforming an existing JC Penney distribution center into a state-of-the-art manufacturing facility for its Megapacks in under twelve months. The Lathrop Megafactory was completed in September last year. 

Speed is also of the essence when it comes to getting Megapack projects built. Snyder highlights the plug & play nature of the Megapack and that Megapacks can be easily strung together to form massive and intelligent power blocks that can readily connect to electricity grids across the world. In the past four years alone Tesla has increased the installation speed of Megapack projects fourfold, while at the same time reducing the required workforce by a factor of three. 

Tesla’s Investor Day also covered developments on the distributed storage front, where Tesla’s Powerwall is the flagship product. Whether it’s the Megapack and front-of-the-meter storage or the Powerwall and behind-the-meter storage, we can expect all of Tesla’s stationary energy storage products to complement what the automaker is doing on the EV front. Both are key elements in Tesla’s vision to get to a “sustainable energy earth” to use Elon Musk’s phrasing at this Investor Day. While the 2030 goal on the EV front is to produce 20 million vehicles annually, the 2030 goal on the energy storage front is to hit the 1 TWh mark. According to Tesla this will require an investment of $150 to $175 billion, which is actually less than one third of Tesla’s current market capitalization. On the other hand, it’s about five times the amount of Tesla’s cumulative investment so far ($28 billion).