Tesla’s New Battery Biz + The Future of Energy in America

I noticed this article on redef.com:

Tesla Isn’t An Automaker. It’s A Battery Company

I tend to agree with this for several reasons. Here’s my thinking.

The use of batteries in our power grid has some HUGE economic potentials and benefits. They’ll fundamentally transform our utilities from businesses built around power generation to business built around power distribution and management, and they’ll significantly reduce the need to build any more power plants for a couple of decades, if ever. (I say “if ever” because as renewable power sources come online, they’ll offset the need for centralized power generation at a rate similar to the adoption of batteries.)

Here’s why:

In electrical circuits, capacitors are used to smooth out fluctuations in voltage, reduce surges, and to store potential energy for use later. When you look at the design criteria for any AC circuit (eg., those that power audio amplifiers or radio transmitters) there are two ways to measure the output: one is called peak-to-peak (PP), and the other is called RMS. These measures have a mathematical relationship where PP = √2 * RMS, or about 1.5 more than RMS.

RMS is what you’d call “steady-state”, so that’s the amount of power needed to maintain a constant output at a given level. PP is what’s needed to handle “maximum power transients”, like brief crescendos in an otherwise quiet classic symphony track, like at the end of the “1812 Overture”. The speakers need to be rated above PP power levels, not RMS, because they’ll eventually blow out otherwise.

In fact, if you look at today’s noisy car audio systems — the ones that thump and bump and rattle your car as they’re coming down the block ahead or behind you — they’re able to do that because they have huge capacitors that store up a charge allowing them to power the speakers with those huge thumping transients.

Ever since our electrical power system was designed, there has been one flaw: there are no capacitors anywhere in the system to buffer or store up a charge to handle transients. One corollary of that limitation is the entire system has to be designed to handle PP loads — that is, roughly 1.5 times the maximum average steady-state load. Peaks happen relatively infrequently, so the entire system is deliberately over-built (by ~50%) to be able to handle a relatively infrequent need (less than a few percent of the time).

So when there’s a huge surge in demand in a large metro area, we can get things called “brown-outs” or even “black-outs”. A lot of effort has gone into design changes over the past two decades to quickly reroute power in the grid to prevent these from happening, but that’s a lot of effort to compensate for the lack of simple power buffering afforded by capacitors.

Batteries are like big capacitors that are designed to store much more power than capacitors, except they take longer to charge as well as discharge.

By incorporating batteries into the power grid, we reduce the need for the grid to handle peak power requirements, since the batteries effectively “smooth out” the power surges over time. That is, they’ll act as capacitors and reduce the effective load requirements on the entire power network.

So as batteries come online in the power grid, they’ll bring the demand curves down to RMS loads, yield a roughly 50% increase in available power capacity with no increase in power generation capabilities required.

And, as more renewable power sources, like solar and wind power come online, and their power is stored by local batteries, they’ll reduce the demand for power from the grid even further.

Some time in the next 5-10 years, the use of batteries in the power grid combined with growth of localized renewable energy sources will allow us to hit a tipping point where there will be no need to ever build another electric power generation plant anywhere in the country. At that point, the price of electric power will start to drop and level out at some much lower level that represents the cost to maintain the power distribution grid rather than power plants.

The only thing vaguely surprising about this is that the power companies have been fighting this whole thing tooth and nail for a decade now. Actually, if you look at this historically, the leaders in any large entrenched market are NEVER the ones to take the lead in disrupting their own markets; it’s always a startup that appears to come out of left-field and gains sufficient traction while nobody is looking, and then they sort of burst on the scene and steal the market right out from under the feet of the market leaders.

Musk has created two HUGE demands for batteries: electric cars and residential solar panels. Why? Exactly what this article suggests: he wants to be the leading battery supplier in the world. And having created captive demand for his battery products, he’s guaranteeing the cash-flow needed to continue innovating battery technologies and cost reductions without having to deal with the entrenched players who are inevitably going to do all they can to block efforts to steal their markets.

Interestingly, the car companies will also become his customers down the road as product demand switches over to electric vehicles.

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