LOS ANGELES — Tesla Motors Inc. Chief Executive Officer Elon Musk said shifting to greater use of solar and wind power will challenge utility companies.
The shift to much greater use of renewable energy will bring “some amount of strife for the existing utilities, especially for those invested more heavily in fossil fuels,” Musk, who is also chairman of solar-power company SolarCity Corp., said today at a California Public Utilities Commission event in San Francisco.
Tesla, the electric-car maker, based in Palo Alto, California, said yesterday it plans to invest as much as $5 billion to build the world’s largest battery factory. The company is seeking to drive down the cost of lithium-ion batteries used in its cars by at least 30 percent. Tesla also has developed a battery that could be used to provide backup power to homes, commercial sites and utilities, according to a regulatory filing yesterday.
Tesla is “working to create stationary battery packs that last long, are super safe and are compact,” Musk said.
Musk and his cousin, SolarCity CEO Lyndon Rive, spoke at the commission as part of its “Thought Leaders” series. The agency regulates power companies in the state.
“There is no doubt storage will become cost effective and deliver electricity with storage at night,” Rive said.
Utilities in California, which are taking months to connect residential solar panels to their systems, are delaying change because they profit from the current system, Rive said.
“When you have a game-changing technology, those in the game don’t want to change,” Rive said. “They like the existing game, the sole source, cost-plus model.”
Rive said it now takes eight months for utilities in California to connect a SolarCity solar and energy storage system to the grid.
Tesla’s proposed battery factory could accelerate changes in the electric utility business as more customers start producing and storing their own power, Adam Jonas, a Morgan Stanley analyst, said in a Feb. 25 note. Musk is also chairman and the largest shareholder in SolarCity, which is now offering Tesla batteries as part of a system for its rooftop solar customers in parts of California and New England.
Other companies are starting to provide similar products as customers seek ways to cut the cord to the traditional U.S. monopoly power utility, which had sales totaling about $360 billion in 2012.
The company has said it’s exploring locations in Texas, Nevada, Arizona and New Mexico for the 10 million-square-foot battery facility that would be key to expanding Tesla’s production from 35,000 cars a year to 500,000 or more.
“While the grid storage opportunity makes the Tesla story more interesting and is likely to further boost stock momentum, we do not see it as a financial game changer,” Barclays Plc analysts led by Brian Johnson, who rates Tesla the equivalent of a hold, said in a note to clients today.
Tesla dropped 0.2 percent to close at $252.54 in New York, the first day this week it hasn’t closed at a record high. The stock has jumped 68 percent this year. SolarCity rose 1.4 percent to a record $86.14.
Copyright 2014 Bloomberg