Tesla is more than just a car company. According to Miriam Tuerk at Forbes, “The electric-car company is working to decentralize power distribution and offer an alternative to today’s utility… Tesla is demonstrating that if the challenge goes unmet by traditional power utility companies, they’ll have their lunch stolen.”
Electric vehicles are part of a sustainable energy/transportation ecosystem that also includes charging infrastructure, smart grid technology, and renewable energy. The key that ties all of these components together is energy storage. Storage, specifically batteries, is the enabling technology that makes modern EVs possible, and that makes renewable energy viable. Battery storage also provides a number of other benefits for the electrical grid, such as load balancing and frequency regulation.
The city of Sydney, Australia has commissioned a new solar panel and battery storage facility that is an important step toward its goal of getting 50% of its electricity from renewables by 2030.
Tesla regularly makes headlines in the mainstream media for its surprisingly rare vehicle fires, delays in the base version of the Model 3, and CEO Elon Musk’s Twitter rants, but beyond the headlines, Tesla’s Energy business has been chugging away. As part of that, since 2015, Tesla has installed over 1 gigawatt-hour (GWh) of storage around the world.
While the scientific community debates whether 100% renewable energy is possible, Australia and Germany are raising the bar and making progress toward that goal.
In its Q1 earnings letter, Tesla repeated its claim that its energy storage business will triple in 2018. Powerwall residential battery installations are up and production of the SolarRoof tiles is expected to increase significantly in the second half of 2018.
This story is about Tesla’s moats, but I don’t mean to imply that Buffett would invest in Tesla. Tesla is far from the value investments of the Berkshire Hathaway portfolio. Rather, Buffett’s comments are to demonstrate the importance of moats. Morningstar even has a guide called Why Moats Matter. Understanding the moats a business employs is clearly important to understanding the business and its future.
Tesla isn’t a car company. It’s a battery company that sells most of its batteries with wheels attached.
In the last couple of years, there has been a growing a number of news articles and blog posts published about energy storage, particularly in the form of battery systems. This interest is very reasonable and the news is exciting because these systems can fill in wind power and solar power electricity production gaps. In many places, they could replace gas-powered peaker plants.
“Any sufficiently advanced technology is indistinguishable from magic” — Arthur C. Clarke. A while before the anticipated unveiling of the Tesla Semi, Elon Musk tweeted, “It can transform into a robot, fight aliens and make one hell of a latte.”
