Automobile and Energy Sectors Converging?

By May 28, 2015

Tesla recently announced the launch of its PowerWall battery, which enables you to store energy at home, demonstrating once again that the pioneering company has its sights on more than just cars. In fact the dividing line between the automobile and energy sectors appears to be eroding more generally. So how far will this convergence go?

The automobile and energy sectors are historically closely linked, both symbolic of the 20th century economic and industrial paradigm and both now being transformed by the current spread of digital. The 20th century pattern was mass manufacture and consumption of standardised products, underpinned by a distribution system built on the availability of oil-derived fuels. The Ford Model T, launched in 1908 in Detroit, Michigan, the traditional home of the automobile industry, is the perfect example. This was a rigidly standardised product which enabled huge numbers of people to buy their own vehicle, in an era when the price of a barrel of oil was almost negligible. The pattern of our current century, characterised by the surge in digital-related technologies, is very different. Among other trends, there is now a strong focus on energy transition towards ‘clean’ energy, mainly renewably-sourced electricity, and the development of ‘smart’, decentralised power networks.

Tesla Motors, founded by the high-profile businessman Elon Musk, symbolises this transformation. Tesla, which manufactures high-powered electric cars and is now building the largest battery factory in the world, Gigafactory 1, has now perfected batteries designed to store energy from the solar panels installed on your roof so as to power your home. With this approach, the energy ecosystem that Elon Musk and his companies are building looks set to reinvent the home of tomorrow.

Solar power and electricity storage: twin pillars of a new ecosystem.

‟We have this handy fusion reactor in the sky; it’s called the sun. You don’t have to do anything; it just works.” These were the Tesla CEO’s pithy words at the launch of the PowerWall home battery. Having studied the current power networks, Elon Musk believes that we should be making more use of solar energy. But this implies that ‟we need to store the energy generated during the day so that you can use it at night.” Musk is also Chairman of US energy services provider SolarCity, which is attacking the solar power market in the United States, in competition with other companies such as photovoltaic solar panel designer and manufacturer Sunpower.

Elon Musk’s launch presentation reiterated his conviction that the twin pillars on which the energy transition will be based are solar power and electricity storage. US companies are already getting to grips with storing electrical energy. Southern California Edison has a storage facility out in the Mojave Desert that houses 600,000 batteries storing energy harvested by wind turbines. The United States administration wants to see a third of the country’s power generated from renewable energy sources by 2020, with electricity storage enabling the country to meet the challenge of peak consumption periods and ensuring that energy is available in the coming years. This is where the Tesla Energy venture that Elon Musk unveiled at the beginning of May comes in. The PowerWall battery, available in 10 kWh weekly cycle and 7 kWh daily cycle models, is designed to be fixed to the wall of your house, enabling you to store energy garnered from your solar panels during the day for use it at night. Musk also announced his plans to produce larger ‘Powerpacks’ for company use. ‟With 160 million Powerpacks, you can transition the United States; with 900 million you can transition the world. And if you want to transition all transport, all electricity generation and all heating to renewables, you need approximately 2 billion PowerPacks,” the Tesla CEO told the audience.

Batteries are a key focus for Tesla. Currently under construction, GigaFactory 1, which when up and running will boast the highest battery production capacity in the world, is scheduled to supply batteries for 500,000 electric vehicles annually. Which implies that the third pillar of the future ‘smart’ energy network will be the electric car.

Tesla: much more than a carmaker…

Why would an automobile manufacturer want to sell batteries designed to store energy for use in the home? The answer apparently lies in the company founder’s plans to disrupt not just one sector but two – automobiles and energy – by helping to drive the creation of a new ‘smart’ network based on solar power, storage batteries and cars. Energy experts have already posited the three Ss – storage, solar and software – as the future paradigm. Meanwhile the value of the modern automobile is tilting increasingly towards the software component. Elon Musk’s goal seems to be to create a smart energy ecosystem that will lead to the re-invention of the home of tomorrow – with the car as an indispensable element in this ecosystem.

In the United States and elsewhere, at peak energy demand periods, power utilities switch on high-CO2-emitting coal-fired electricity plants, known as ‘peaker’ plants, to provide the additional power. Startup Ohmconnect is now striving to avoid peaker plant activation by alerting consumers about peak times and urging them to reduce their energy consumption. In similar vein, Elon Musk envisages his car batteries re-injecting unused power back into the grid in order to help manage peak time consumption. A key component in a ‘smart grid’ system is the availability of ‘distributed’ (i.e. decentralised) power sources. The presence of a vast number of electric cars on the roads can help to provide such an independent source of energy.

Moreover, given that owning your own car is no longer necessarily seen as an attractive goal for every household, Musk is making efforts to give the automobile a brand new image. Henry Ford launched his Model T with immense success in the early part of the 20th century with the slogan that everyone would be able to afford and own their own vehicle. Synonymous at that time with individual freedom and prosperity, car ownership is today being called into question on environmental grounds and also with the rise of transport services such as Uber and Lyft. Lyft CEO Logan Green claimed a few months ago that it is now cheaper to use Lyft in San Francisco than to run your own car. Musk is however striving to convey the image of freedom by proving that Tesla vehicles help to ensure the consumer energy autonomy. There is also the argument that these cars are equipped with ultra-powerful software that is updated on a regular basis, which means that their value will tend to depreciate less year by year than a traditional vehicle.  Not least, by working to develop its new Model S car with autopilot functionality, Tesla is helping to promote a re-think of the private car as an integral part of a smart transportation ecosystem.





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