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Tesla's Gigafactory: This Changes Everything for Solar Startups

Elon Musk's $5 billion plan to build the world's biggest battery factory could mean big business for solar and other tech startups.
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By now, you've heard the news: Tesla is about to spend $5 billion to build the world's largest battery factory, known as the "gigafactory." The facility will ensure a steady supply of batteries for Tesla's third-generation electric vehicles and, not coincidentally, a steady supply of energy storage for founder Elon Musk's other brainchild, SolarCity. But what you might not realize is how this outsize investment in batteries is poised to create and expand business opportunities for countless entrepreneurs in the solar industry.

In short: for entrepreneurs already operating in or thinking of operating in the solar market, this changes everything.

Why It Matters

Traditionally, the primary pain point for solar companies has been energy storage. Until now, the lithium-ion batteries Tesla intends to manufacture have been prohibitively expensive. That means solar installers had to sell customers on the fact that solar is a good investment, even though current technology only reliably supplies power while the sun is shining. Tesla claims its factory, which aims to produce as many batteries by the year 2020 as are being produced in the entire world today, will likely reduce the price of batteries by some 30 percent. That means solar companies could begin bundling storage with their solar panels, sweetening the deal for consumers without crippling profits.  

"This is the development a lot of people have been waiting for," says Joel Makower, Chairman of GreenBiz Group. "In a few years we’ll look back and laugh that we ever had solar panels without a way to store the energy."

Initially, Makower predicts the lion's share of new solar sales will go to SolarCity and other large entities that can use scale to ensure profitability early on. But within a year or so, as the price of the batteries comes down, smaller players will begin to reap the benefits.

"The market potential is way bigger than any one company can handle. There are enough niche markets that there will be opportunities for everyone," he says, adding that he anticipates a swell in market demand. "Storage is like the 'killer app.' It means solar can provide extremely cheap energy all day and all night, not just while the sun is shining. That completely changes the value proposition."

And it's not just solar installers who stand to gain. As consumers begin to unplug from traditional utilities and rely instead on their own solar panels and home storage units, new technology will be required to meter and manage that energy. Makower says there's also a big business opportunity in managing the financial side of solar. Now that people will be storing their own energy, they'll likely have excess they can start to sell off. Imagine, for instance, an eBay for energy.

"Whole new services we can't even imagine will be enabled by the fact that we will soon be buyers and sellers of electricity, rather than just consumers. Anyone who uses energy will now be a 'prosumer,' because they're producing energy, too," Makower says. 

And if your company isn't in the solar industry? Tesla is still doing your business a serious solid. This new ability to unplug from the grid entirely will make cities more resilient in the face of a natural disaster like Hurricane Sandy. "Backup power is going to be of value certainly to businesses that worry about disruptions from hurricanes, storms, or even droughts that make water scarce for utilities," Makower says. 

"Solar has been a 40-year, overnight success," he says. "With this factory, Tesla is saying, 'The future is now, and it's time to turn this into a big business."

Last updated: Feb 27, 2014




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