Tesla To Build Megapack Factory In Shanghai

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Over the weekend, Elon Musk tweeted that Tesla will construct a factory in Shanghai to manufacture its Megapack energy storage products. If you want more information from the company about this, you must go to its media specialist, Elon Musk Helen Waite Harry Bōlz.

In the absence of any solid information from Tesla, we need to turn to alternate sources such as Reuters and the Washington Post to find out more. Citing news sources in China, the Washington Post says the new Chinese factory will be built in Lingang, a suburban area of Shanghai where Tesla’s vehicle factory is also located. Lu Yu, an official in Lingang, told local media that production could start as soon as the second quarter of 2024.

Tesla currently manufactures its Megapack energy storage systems at a factory in Lathrop, California, that produces about 10,000 units annually, which amounts to 40 GWh a year. At an average of 70 kWh for a Tesla vehicle battery (just a guess), 40 GWh would be enough to power roughly 570,000 Tesla vehicles.

Tesla is in the process of ramping up production in this factory to address the growing demand of Tesla Energy and battery storage. There are rumors floating around the internet that the wait time for Megapack units is about 2 years at the present time. At the end of October, the Lathrop factory was turning out 25 Megapack units a day. Each Megapack has a storage capacity of 4.9 MWh, which translates into about 35.6 GWh of electricity a year, says Torque News.

The latest version, known as the Megapack XL, uses LFP batteries, which are better suited to energy storage duty than the NMC batteries typically used in many electric vehicles. Energy storage does not require the same ability to accelerate a car from a standing stop to 60 mph in four seconds, something NMC batteries do very well. It does, however, put a premium on a steady flow of electrons over time, something LFP batteries excel at. They also may have a somewhat longer service life than NMC batteries.

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The Megapack Promise

A Megapack is intended to store energy from renewable sources such as wind and solar for relatively long periods of time and release it back to the utility grid when the output from renewables falls off after the sun sets or when the wind is not strong enough to spin turbines.

A secondary but equally important characteristic of energy storage batteries is their ability to react to voltage or frequency variations on the grid in milliseconds. Such anomalies may not affect your television but can be harmful to more sophisticated electronics like the servers that provide cloud storage for commercial and military applications.

A Megapack or similar energy storage device can generate income in two ways. First, it can store cheap electricity produced when the sun is shining or the wind is strong and sell it back at a higher price when demand rises — typically between 4:00 and 8:00 pm most days. Second, grid operators compensate energy storage systems for the voltage and frequency stabilization services they provide.

On its website, Tesla says a Megapack “stores energy for the grid reliably and safely, eliminating the need for gas peaker plants and helping to avoid outages.” Each pack can store enough energy to power 3,600 homes for an hour, the company claims.

Avoiding Blackouts

The Washington Post points out that one of the most notable and disastrous outages in recent history was the 2021 blackout in Texas that left millions without electricity after the state was hit by a winter storm. Unlike other states, Texas operates on its own power grid, which leaves it without the ability to restore power by drawing energy from other states the way other power grids across the country do. In theory, storage options like Megapack units could help avert such situations, or at least soften the blow of such weather events. During that blackout, many utility costumers saw their utility bills increase by a factor of ten — or more.

Storage options for renewable energy is now a matter of national security, energy and security experts have warned. A recent report by the Military Advisory Board at the Center for Naval Analyses highlighted energy storage as a solution to “a growing number of threats to our homeland and national security.” It added that “advanced energy storage is a future requirement for meeting the full potential of a secure and resilient grid.”

The Megapack & International Diplomacy

This is a time that is fraught with challenges for companies like Tesla that want to do business in China. On the one hand, that country has suffered a significant reduction in economic growth as the result of its aggressive strategies to deal with the Covid-19 pandemic. Many of its factories were shuttered for months and foreign investors fled China looking for safer havens for their money. Now China is anxious to attract more foreign investment again. That’s good for Tesla,

What isn’t so good for Tesla is that China at this very moment is sending fighter planes to buzz the island of Taiwan to show its displeasure that the president of Taiwan dared meet with a US congressman recently. China fiercely defends its claim to Taiwan much the same way that Vladimir Putin defends his claim that Ukraine is historically a part of Russia. Nothing about the future is certain but the possibility that armed conflict could occur over the Taiwan situation is certainly much higher than it was before Nancy Pelosi visited Taipei last year.

If a hot war ensues, Tesla could find itself with factories on both sides of the conflict and be forced to choose between them. Elon Musk seems blissfully unconcerned about such global instabilities. Perhaps he, like those captains of industry who did business with the Third Reich, believes there is money to be made even in times of global conflict and as long as you look the other way.

One thing we don’t know is the extent to which Chinese battery manufacturers like CATL and BYD may be involved in the new Shanghai Megapack factory. The Tesla announcement suggests the company will manufacture the storage devices but says nothing about who will supply the battery cells inside them. Both CATL and BYD have vast experience with LFP battery manufacturing, but there are also other Chinese battery manufacturers who would love to have a piece of Tesla’s energy storage business.

Chinese media reports indicate that the Megapacks produced in Shanghai will be supplied to customers worldwide. 98% of the news we hear about Tesla is focused on its automobiles, but Elon Musk has said he expects the energy storage side of the business to be bigger than the vehicle side of the business in the future.

There is no question that energy storage is a vital part of the renewable energy transition, and so the news that Tesla plans to double its manufacturing capacity of Megapack units is welcome. We have asked for more details and will keep you informed just as soon as Harry Bōlz gets back to us.


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Steve Hanley

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be "woke" and doesn't really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: "The secret to change is to focus all of your energy not on fighting the old but on building the new." You can follow him on Substack and LinkedIn but not on Fakebook or any social media platforms controlled by narcissistic yahoos.

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