Elon Musk: A thermostat-sized box may one day power your house

The ties between Tesla and SolarCity
will only tighten from here




A previous version of this article incorrectly spelled the name of SolarCity’s co-founder and CEO. His name is Lyndon Rive.

Jennifer Booton/MarketWatch
Tesla CEO Elon Musk and SolarCity CEO Lyndon Rive discuss the future of solar energy at the Nasdaq on Wednesday.

NEW YORK (MarketWatch) — It’s easy to get lost in the numbers that swirl around a project as massive as Tesla’s $5 billion gigafactory. But by sitting back and looking outside of the box, the potential ground-level benefits of such an immense factory begin to set in.

The numbers might make you woozy: a $5 billion investment, a $1.25 billion tax break in Nevada, 6,500 new jobs, 50 gigawatts of battery storage by 2020, 500,000 electric cars per year.

What this really means is the massive factory — which Tesla Motors Inc.TSLA, +0.25%  CEO Elon Musk and his first cousin, SolarCity Corp. SCTY, -0.19%   CEO Lyndon Rive, hinted Wednesday at a private conference may be the first of several perhaps larger plants — is that an increased level of manufacturing scale will improve the efficiency and affordability of lithium-ion batteries.

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That, in turn, will power not just the car, but also the home. In fact, of the 50 gigawatts of battery power Tesla aims to produce through the gigafactory by 2020, 15 gigawatts is expected to be funneled directly towards stationary energy storage systems.

It’s that intersection of batteries and power storage that these two cousins, who conceived of SolarCity several years ago in an RV on their way to Burning Man, hope to forge together.

SolarCity and Tesla have for years operated as separate entities, seemingly with a separate focus. But that is starting to change. Musk, in a closed-door interview with the press on Wednesday, said Tesla is using SolarCity’s customers as a base to discover how to make battery packs that are small enough, light enough and powerful enough that they might one day sit comfortably in your garage, a mere four inches from the wall.

“We want to make sure the gigafactory has excess capacity for grid storage.”

Tesla CEO Elon Musk

Musk didn’t provide specifics on this futuristic vision, but alluded to the fact that home storage might one day fit into a device similar to the size of a Nest thermostatGOOGL, +0.77%  .

“We want to make sure the gigafactory has excess capacity for grid storage,” Musk said earlier Wednesday at a SolarCity and renewable energy conference. And in envisioning this future, Tesla is working directly with SolarCity to determine what its customers need.

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That paves the way for a potential partnership between the two in the future, although Musk said Tesla wouldn’t, well “couldn’t,” provide exclusivity to SolarCity, likely for financial and competitive reasons.

Today, the batteries needed to store a sufficient amount of solar energy are far too large to be tacked onto a single residential home. However,as the two work together and utilize SolarCity’s existing customer base, they hope to scale down the size of a battery over time.

The idea was first introduced in late 2013 in the form of SolarCity’s DemandLogic product, which uses complex algorithms in conjunction with a homeowner’s power system to discharge power from a Tesla battery during peak demand hours.

At 5 p.m., when the sun starts to set, solar production decreases and a homeowner becomes more reliant on the utility, the battery steps in as a temporary fix during peak, high-demand periods, enabling the homeowner to meet energy needs without relying too heavily on the utility and being forced to pay peak prices.

The next morning as the sun rises, the battery is fully charged again and the cycle restarts.

Tesla Motors Inc.
A look at the Tesla Gigafactory to be based in Nevada.

In the future, a dual system like this may help to keep more energy off the grid and make homes more self-sufficient. However, Musk and Rive both admitted that the utility will never quite die, with Musk predicting a future where 65% of energy consumption comes from solar, and the rest from utilities.

“A grid is useful and has its needs,” Rive said. “But I’m hoping a majority will come from the inside.”