Tesla Just Took Its First Step Towards Obliterating The Power Companies

Elon Musk just announced details of Tesla's plan to start pumping out lithium ion batteries like M&Ms at its planned "Gigafactory."

Obviously, it's big news for electric vehicles as this should bring down the cost of a very expensive component.

But it has equal and possibly greater significance for renewable energy.

We've explained that power storage is the key to unlocking widespread renewable energy. For renewables to work on scale, they needs to be able to provide a continuous current flow, something difficult to achieve when the wind isn't blowing or sun isn't shining.

But the cost of doing so is currently exorbitant. Tom Leyden, the head of Solar Grid Storage, whose revolutionary container storage system on the side of a Maryland freeway we profiled a few months ago, says batteries currently represent 50% of the cost of one of his systems.

Which is why he's hailing the decision.

"If those prices comes down, our market expands, we can offer a lower priced product and put more storage in our system," he told us. "So this is very important." Solar execs are comparing the current environment to where photovoltaic costs were in the last decade, just before their prices plummeted. "At that point in time solar modules were very expensive, and the industry was pushing a couple of different alternatives: thin films were going to be photovoltaic of the future," said Tony Clifford, CEO of Standard Solar. His company also worked on the Konterra project. But thanks to worldwide government incentives, he said, the price of traditional silicon ended up falling through the floor, paving the way for the current renewables boom. In this case, of course, the marketplace is creating the demand for lithium ion batteries. But renewables will again be the beneficiaries. "You're going to be able to drive costs out right across supply chain and see some significant cost reductions in storage technology." A report from the Rocky Mountain Institute released prior to Tesla's announcement (spotted by GTM Media) was even more extreme about the possibilities for cheaper storage. "The coming grid parity of solar-plus-battery systems in the foreseeable future, among other factors, signals the eventual demise of traditional utility business models," the authors wrote. RMI continues: "Whereas other technologies, including solar PV and other distributed resources without storage, net metering, and energy efficiency still require some degree of grid dependence, solar-plus-batteries enable customers to cut the cord to their utility entirely." Tesla's announcement represents a major step towards a larger, cheaper energy storage market that could have huge implications for making renewables more widespread.