What Investors Are Missing About Tesla Energy
For manufacturer of electric vehicles and pillar of renewable energies You’re here (NASDAQ: TSLA), batteries are a bad way to make money. Many companies compete with each other to manufacture them cheaply, which keeps battery profit margins low. To capitalize on this, Tesla needs to add brain power to the batteries – and luckily for Tesla, its autonomous control software does just that.
When paired with renewables and storage, Tesla’s software has the power to disrupt the roughly $ 400 billion U.S. electric utility market and create a new era of abundant energy, distributed energy and virtual power plants – a huge opportunity that too many investors completely overlook.
The US grid suffers from polluting power plants, wasted electricity and blackouts. It must also maintain a delicate balance by constantly predicting the correct supply and demand. Solar and wind alone cannot solve these problems; these sources produce the most energy at a time of relatively low demand. But adding energy storage solves this intermittency problem, adds an additional margin of safety against outages, and reduces the network’s carbon footprint.
With Tesla’s control software, battery owners can buy or sell power to each other in real time, alternating between using battery power, on-site production, and power from the grid in the blink of an eye. Part of the software suite, Autobidder, helps utilities and homeowners use the cheapest and most efficient power source at all times. Autobidder learns when to use energy stored in batteries for the personal use of customers, and when to sell that stored energy to others for maximum profit. Powered by machine learning, this software is continuously improving its ability to forecast electricity prices by collecting data from different geographies and regulatory environments.
Why Tesla wins
Tesla’s smart energy storage software leads the industry as it has the broadest reach, ties into Tesla’s full line of energy products, and has accumulated strong performance. Autobidder runs on more than 1.2 gigawatt hours (GWh) of Tesla’s commercial storage – enough to light more than 100 million LED bulbs. This vast storage network ensures that Tesla collects a mountain of diverse and valuable data to improve the performance of its software. As in the race for autonomous driving software, the company with the best data wins.
Tesla’s size and willingness to handle tasks in-house allows it to run software on its own servers, while competing products rely on third parties to provide computing power and web hosting. Tesla handles everything from programming software to building the solar tiles itself. By taking on these tasks, Tesla should be able to reduce costs, make Autobidder price competitive, and maintain control over the overall user experience. And by making many batteries that Autobidder runs on – Megapacks and Powerwalls – Tesla Energy may have another opportunity ahead. At present, Autobidder works with most batteries. But Tesla could modify the software to get better performance from its own batteries, prompting customers who already use Autobidder to invest in Tesla’s batteries as well.
The Hornsdale Power Reserve (HPR) in Australia is a testament to Autobidder’s success; no other software can boast of such impressive results on such a large scale. The HPR is the world’s largest lithium-ion battery, and Tesla’s auto-offerer saved customers $ 116 million in 2019. The giant battery responded to power outages or power shortages. coal, providing affordable energy and stabilizing the Australian grid. In Vermont, Green Mountain Power (GMP) has built a successful virtual power plant by connecting thousands of residential powerwalls, using Autobidder to store energy on that grid and release it at times of peak demand. This smart setup saved GMP customers $ 3 million in 2020 alone.
Why energy storage software has a long growth track
Tesla CEO Elon Musk said Tesla’s energy business could become as big as its automotive segment when it calls for Q3 2019 results. It’s not such a crazy idea given that Global battery deployments in 2021 will increase 156% year-over-year. From there, deployments are expected to reach 70 GWh in 2030, up from 4.9 GWh in 2020. A wave of sustainability commitments, renewable investments and falling battery prices are expected to further stimulate storage demand. – and expand market opportunities for Tesla’s automatic supplier.
The auto bidder’s revenue will have a better chance of growing as Tesla Energy enters new markets and customers who own Tesla batteries will also choose to purchase the software. Tesla Energy takes its first step in Texas, installing a 100 megawatt battery in Angleton and becoming a registered utility. This Texan project is an app, but Tesla is installing a lot more energy storage around the world on 3 GWh in 2020 alone. Autobidder, in total, only works on 40% of that, leaving a huge opportunity for the software. to earn money on Tesla’s existing storage.
A future entangled in power lines
Although Autobidder has huge winds behind it, renewables and battery storage are still held back by the transmission lines that send that energy between generating plants and homes. In Vermont for example, the Public Utilities Commission turned down a new solar project because the grid does not have enough capacity for more energy production.
A Princeton study found that the United States needed to triple its transmission infrastructure by 2050 to decarbonize the grid. And while a production project can take about a year to build, transportation infrastructure typically takes three to ten years to convince landowners to sell plots and gain approval from many regulators.
Unfortunately, the study also found that most of the potential locations for new solar or wind farms are in the middle of the United States, and not where most Americans live. In a worst-case scenario, Autobidder’s utility applications could be limited to regions where renewables are most profitable and where grids can handle more renewable energy.
Even with these looming transmission issues, Tesla’s auto-offerer is in a prime position to improve the grid. It has the lead and growth path to become the most popular and cost effective solution in energy storage software.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.